Too Much Riding on Employer Stock

More workers are contributing to 401(k) retirement accounts, but many are still too heavily invested in their own company’s stock, according to a national survey released Tuesday by Hewitt Associates Inc.

Hewitt’s annual benchmarking report, titled “How Well Are Employees Saving and Investing in 401(k) Plans,” found that 70.3% of workers participated in defined-contribution plans in 2004, up slightly from 69.8% in 2003.

“We saw some improvement ... but we’re a little disappointed that we didn’t see more movement than we saw,” said Lori Lucas, director of participant research at Hewitt, which is based in Lincolnshire, Ill.

The study also found that despite horror stories about workers who lost most of their retirement savings with the collapse of Enron Corp. in 2001 and WorldCom Inc., now MCI Inc., in 2002, many workers continue to buy and hold large amounts of company stock.

The Hewitt survey found that more than 1 in 4 workers held half or more of their total 401(k) balances in employer stock. Many receive company stock as part of the company’s “matching” contribution.

Lucas said 10% to 20% is the maximum one should hold of any asset, including company stock. She said most companies have eliminated mandatory, long-term holding periods for company shares, so workers can sell the them if they want. “But people are not responding by diversifying their balances,” she said.