Large Employers Lighten Up On Company Stock Limits

June 26, 2003 ( - There has been a dramatic shift away from limits keeping employees from diversifying their DC plan holdings away from company stock, a new survey has found.

According to a survey conducted by the Committee on Investment of Employee Benefit Assets, almost one-third of respondents reported liberalizing or eliminating company stock transfer restrictions in 2002.

Also, fewer than a quarter of companies that required the investment of a plan match in company stock limited the ability of participants to diversify that investment last year.  That’s a significant shift from a 2001 survey, which found that almost three-quarters of respondents placed some type of transfer restriction on the company stock match (see  Restrictions Loosening On Company Stock Investment ).  The inability of Enron participants to transfer their company match from that stock investment was widely reported and criticized by lawmakers (see  Party Lines Parse Pension Protection Proposals ).

Among other survey findings;

  • Virtually all of the large employer respondents offer a company match, and a third require the full match to be invested in company stock. A year ago, half of respondents required the match to be invested in company stock.
  • Slightly more than half of respondents had an employee stock ownership plan (ESOP) feature in their DC plan. Plans with an ESOP feature have made the most significant changes with respect to company stock restrictions,according to CIEBA. More than half of those with an ESOP feature do not require any of the matches to be invested in company stock, compared to only 6% in the 2001 survey.

The survey also inquired about DC advice programs. Among those findings:

  • more than 40% of survey respondents indicated that they offer some type of investment advice to their DC plan participants
  • most of the advice programs (84%) are relatively new, in place for three years or less.

 Fifty-seven of CIEBA of AFP’s 120 plan sponsors responded to this March 2003 survey. The median market value of assets for plans in the survey was $2.5 billion.