- The Washington Times - Thursday, January 24, 2002

Employees at some of the nation's largest companies have put even more of their retirement savings in company stock than those at failed energy giant Enron Corp.
At paint chain Sherwin-Williams, for instance, some 92 percent of all money in the 401(k) retirement plan is in company stock.
At Coke, the figure is about 81 percent.
At pharmaceutical giant Pfizer Inc., the figure is more than 86 percent.
At McDonald's, it is 74 percent.
Enron employees had invested 62 percent of their 401(k) assets in the company's stock as of the beginning of this year, according to Securities and Exchange Commission filings. The workers had 18 other investments to choose from in their plans.
About one-half of 1 percent of all public companies match their employees' 401(k) contributions with company stock, rather than cash, according to the Employee Benefits Research Institute. Although the percentage seems small, these companies are often among the nation's largest and best-known.
Enron was one of these companies, matching up to 6 percent of contributions with company stock, said Vance Meyer, company spokesman. The "matching" stock came with a condition employees could not sell it until they turned 50.
Other companies, such as Coca-Cola, Procter & Gamble, and McDonald's, also match contributions with their stock. So employees end up with a stake in their company, for better or worse, because they have no other choice.
But some 43 percent of workers at the nation's largest employers pour their money into company stock voluntarily, according to a survey by the Profit Sharing/401k Council of America, which represents employers with 401(k) plans.
"Sometimes 50, 60, or 70 percent [of a retirement plan] is in stock, and the workers are not even required to have a single penny in stock," said Edward Ferrigno, vice president of the council. "That's because you're talking about Fortune 50, Fortune 100 companies that got there by doing things right, and they are excellent investments, and the people who work for those companies have great confidence in them."
Financial advisers from firms such as Charles Schwab or Fidelity Investments, which also provide 401(k) plans, say investing heavily in one's employer is a popular trend among workers of large corporations. But such one-sided investing can lead to disastrous situations such as that of Enron's employees, who lost about $860 million, they say.
"The issue with Enron is that a lot of employees were overconcentrated in the company stock and when the stock was impacted negatively, the employees were impacted negatively as well," said Lance Burg, a spokesman with Charles Schwab. "Those who were overconcentrated were severely impacted. It's a really sad story."
However disastrous, cases of large losses such as those suffered by Enron employees are rare, according to Ann Combs, assistant secretary for the Pension and Welfare Benefits Administration. The agency, a division of the Department of Labor that investigates pension complaints, began investigating Enron on Nov. 16.
"Most 401(k)s are well-run and well-managed, and employees can be secure that the assets are there and they will be there when they retire," Miss Combs said, describing the average perpetrators of pension fraud as smaller businesses with low public profiles.
Problems arise typically when companies are in financial trouble, file for bankruptcy protection and stop making payments to their employees' 401(k) plans, said Miss Combs. In such cases, the agency prosecutes the companies, trying to recover whatever money the workers lost.
The agency started a national enforcement project in October 1995, and since then 6,678 investigations have been opened. Some 5,380 were resolved, and 3,489 of the cases resulted in recovered money.
The number of companies defaulting on contributions to 401(k) plans has slowly risen as the popularity of 401(k) plans over defined-benefits plans has risen, Mr. Ferrigno said.
Roughly half of Americans with retirement-savings plans are enrolled in defined-benefit plans, which specify the percentage of yearly salary a worker will receive from the employer upon retirement.
The other half of participants are covered by 401(k) plans, which employers are increasingly choosing because 401(k) plans shift the investment risk off the company and onto the worker, said Shaun O'Brien, senior policy analyst with the AFL-CIO, a federation of the nation's major labor unions.
But there are things employees can do to protect their retirement savings, starting with learning more about sound investing and seeking help from professional advisers, Mr. O'Brien said.
Diversifying investments placing some savings into mutual funds and others in various companies' stock is the most important move employees can make to protect their retirement savings, said Kara Kilpatrick, spokeswoman for Fidelity Investments, the nation's largest retirement-plan provider.
"The most important thing," she said, "is not to keep all of your eggs in one basket."
Employees also can confront their employers about 401(k) plan requirements that might make them feel uncomfortable, Mr. O'Brien said.
"It's certainly not an act of disloyalty to the company," he said. "We are talking about retirement security here, and that's important, especially to people closer to retirement."
Concerns raised by the Enron collapse have led to numerous federal investigations and proposed amendments to retirement-savings law.
Congress is considering whether to tighten protections for retirement-plan participants in light of Enron's collapse. Two bills on the subject introduced last month in the Senate and House seek to limit the amount employers can require employees to invest in the company's stock as part of their retirement plans.

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