|
BETHESDA, MD -- MARCH 5, 2002 -- Virtually all plan sponsors (92 percent) responding to a survey conducted by the Committee on Investment of Employee Benefit Assets, an affiliate of the Association for Financial Professionals (CIEBA of AFP), had company stock in their defined contribution (DC) plans. On average, company stock represented 29 percent of the total DC assets in these plans, with an average total dollar amount of $2.4 billion. However, the results show that the rules governing contributions, matching, transfer and trading restrictions are not uniform:
- Ninety percent of survey participants offer a company match program, half of which require the full match be invested in company stock and 41 percent of which do not require any of the match to be in company stock.
- Of those who require all or part of the match to be invested in company stock, 72 percent place some type of transfer restriction on the company stock match. However, nearly 20 percent of those with restrictions on stock transfers expect to liberalize some or all of these restrictions over the next 12 months.
- Forty percent of respondents indicated that their plans had an employee stock ownership plan (ESOP) feature. Plans with an ESOP feature tended to be larger than plans without such a feature the average value was over $7 billion compared to $3.7 billion. And, more than three-quarters of the respondents with an ESOP feature require 100 percent of the match to be in company stock.
- Almost three-quarters (74 percent) of respondents who place restrictions on the company stock match use some type of age dependent rule regarding transfer restrictions. Sixteen percent favor time-dependent diversification rules with holding periods ranging from one to 10 years. Twenty percent cited "other," i.e., a combination of age and service requirements, and partial diversification after a period of time.
- DC plans hold a relatively small percentage of outstanding shares of company stock. In almost three-quarters (72.5 percent) of the cases, DC plan holdings account for five percent or less of their company's outstanding shares.
"As fiduciaries for many of the nation's largest pension funds, CIEBA of AFP members have first-hand knowledge of the issues related to the use of employer stock in 401(k) plans, and how employees and plan sponsors may be affected by proposed changes," said AFP's President and CEO Jim Kaitz. "Any change in law or regulation should be administratively feasible, not create a whole new regulatory regime, nor impose significant costs on plans or their participants."
Fifty of CIEBA of AFP's 120 plan sponsor members responded to this October 2001 survey. The average market value for 401(k) plans in the survey was $5 billion.
The Committee on Investment of Employee Benefit Assets, better known as CIEBA, is the voice of the Association for Financial Professionals (AFP) on employee benefit plan asset management and investment issues. CIEBA represents more than 120 of the country's largest pension funds today and became affiliated with AFP in the spring of 2000. CIEBA's members manage more than $1.3 trillion of plan assets, representing 16.5 million plan participants and beneficiaries.
The Association for Financial Professionals in Bethesda, Maryland, has grown in the past 20 years into a community of more than 14,000 individuals representing a broad spectrum of financial disciplines. AFP turns knowledge into performance by supporting members throughout all stages of their careers with research, continuing education, career development, professional certifications, publications, representation to key legislators and regulators, and the development of industry standards.
# # #
EDITORīS NOTE:
Based on the findings from its company stock survey, CIEBA of AFP has formulated "Principles for Consideration of Changes to Law/Regulations Governing Company Stock in 401(k) Plans." The group advocates nine principles that should serve as the basis for any policy changes adopted in this area.
Back to top
|
