Losses Prompt Proposals to Limit Company Stock in 401(k)s Employee Benefit News (02/02) Vol. 16, No. 2 p.1; Gunsauley, Craig
Lawmakers are using the collapse of Enron and the subsequent loss of billions of dollars in the Houston company's 401(k) plan to push for reforms in defined contribution plans. Legislative leaders like Sens. Barbara Boxer (D-Calif.) and Jon Corzine (D-N.J.) have introduced measures to discourage participants from making risky investments. Under the Boxer/Corzine bill, a cap would be placed on the amount of stock a company could place in its 401(k) account holdings to 20 percent, and the number of days (90) an employer can require a participant to hold a matching contribution in company stock would be lowered. In addition, the tax deduction companies get for matching 401(k) contributions in company stock would be cut in half. Similarly, Rep. Ken Bentsen (D-Texas) has submitted legislation that touches on this area in the same way, except his bill requires plan sponsors to allow participants 90 days notice in case of a blackout period and to obtain approval from the Department of Labor for the span of the blackout. If passed, the Boxer/Corzine measure would work to dissuade large public companies from offering matching contributions in their 401(k) plans. Meanwhile, the White House has ordered the Treasury and Commerce departments to examine rules that govern the use of company stock in defined contribution plans when plan sponsors go bankrupt.