Benefit Specialists Differ on Whether There Should Be Government Limits on Company Stock Investments in 401(k) Plans 2/5/2002
From: Stacy Van Alstyne of the International Foundation of Employee Benefit Plans, 262-786-6710, ext. 8217 BROOKFIELD, Wis., Feb. 5 -- A recent Employee Benefit Research Institute (EBRI) survey revealed that among the respondents whose client/employer did not require employer contributions to be invested in company stock, 66 percent feel that the government should limit the plan sponsor's ability to mandate that matching 401(k) contributions be invested in company stock. Conversely, when the respondents' plans do require that employer contributions to a 401(k) plan be invested in company stock, only 38 percent believe that there should be government-imposed limits on the plan sponsor's ability to mandate that matching contributions to a 401(k) plan be invested in company stock. The respondents were also not in favor of government mandates when the contributions are the employee's (participant-directed) -- 63 percent were against the idea. These findings were revealed by EBRI's survey of International Society of Certified Employee Benefit Specialists (ISCEBS) members. The survey polled 3,346 members of ISCEBS, a non-lobbying professional organization whose members all hold the Certified Employee Benefit Specialist designation, on January 14, 2002. Benefit specialists were asked to answer the questions for their largest client (in terms of participants) if they were a consultant or service provider for 401(k) plans. Otherwise they were asked to answer for their employer. The special report is available in its entirety at www.iscebs.org. Other findings include: It is more likely for there to be a company stock investment option in the 401(k) plan if there is also a defined benefit plan--60 percent of those with a defined benefit plan vs. 35 percent of those without. Most respondents viewed blackouts, a time period when participants are not allowed to trade during recordkeeper transitions, as a necessary by-product of the process, regardless of whether company stock is offered (79 percent) or not (72 percent). 62 percent of respondents feel that 401(k) plan sponsors should not be allowed to restrict the sale of company stock they contributed as a company match as long as they are employees. The vast majority of respondents strongly agreed that plan sponsors offering company stock as an investment option should advise their employees to diversify. The majority of respondents agreed that problems resulting from employees investing their own contributions in company stock would be mitigated if employers were allowed to provide independent financial advice to their employees. The survey was developed by Jack L. VanDerhei, Ph.D., CEBS, an associate professor in the Department of Risk Management and Insurance at Temple University; editor of Benefits Quarterly, an ISCEBS publication; and Research Director of the Employee Benefit Research Institute's Fellow's Program. ------ The International Society of Certified Employee Benefit Specialists (ISCEBS) is an educational association dedicated to providing professional development opportunities for its members-Certified Employee Benefit Specialists. To earn the professional CEBS designation, an individual must pass 10 national examinations, including one course devoted to defined contribution plans and another on investments. www.iscebs.org The Employee Benefit Research Institute (EBRI) is a nonpartisan, nonprofit research organization created to provide objective and reliable analysis of retirement, health and other economic security issues. EBRI does not lobby and does not take positions on legislative proposals, and its membership includes a wide range of organizations with an interest in benefits issues. www.ebri.org |