As Congress begins to investigate the use of company stock in 401(k) plans, FEI has issued am appeal to members to write to their representatives asking them to act cautiously before making any wholesale changes to retirement policies. In the letter, FEI notes:
"Recent stories, published in newspapers from around the country, have highlighted the financial losses suffered by many Enron employees who had invested in company stock that was part of Enron's 401(k) plan... Certainly, many employees lost several thousand dollars in their individual 401(k) account balances; however, some of those losses could have been prohibited by the employees themselves. Enron allowed its employees to divert up to 15 percent of their salaries to their 401(k) plan (up to the statutory limit) and Enron matched their contributions, up to 6 percent, in company stock.
"Enron offered 20 different self-directed investment vehicles in which its employees could invest. While it is true that the employer match in company stock could not be sold prior to age 50, the employees had the opportunity to properly diversify the remainder of their portfolios.
"The corporate practice of matching employee contributions to 401(k) plans is not uncommon. About half of the largest public companies in America also match employee contributions in company stock. [We are] concerned that if Congress places limitations on the use of company stock for matching purposes, companies who currently match with stock may reduce or eliminate their matching programs, simply because they may not have the financial resources to match in cash.