Large U.S. Pension Funds Ease Restrictions on Company Stock and Offer More Advice for Participants

Survey of large pension funds reveals practices changing in wake of Enron

BETHESDA, MD -- JUNE 26, 2003 --While company stock continues to be an important part of large defined contributions (DC) pension plans, there has been a dramatic shift away from limits that prevent employees from diversifying their holdings, according to a survey conducted by the Committee on Investment of Employee Benefit Assets, an affiliate of the Association for Financial Professionals (CIEBA of AFP).

Among the key findings of the survey:

• Virtually all of the survey respondents offer a company match, of which one-third require the full match to be invested in company stock. This is down from a prior survey, conducted in October 2001, in which one-half of respondents required the match to be invested in company stock.
• Of those who require the match to be invested in company stock, less than one-quarter limit the ability of participants to diversify out of company stock. In the earlier survey almost three-quarters of respondents placed some type of transfer restriction on the company stock match.
• Slightly more than half of respondents had an employee stock ownership plan (ESOP) feature in their DC plan. Plans with an ESOP feature have made the most significant changes with respect to company stock restrictions. More than half of those with an ESOP feature do not require any of the matches to be invested in company stock, compared to only 6% in the 2001 survey.
• Almost one-third of survey respondents report taking action to liberalize or eliminate company stock transfer restrictions in 2002.

A growing percentage of plans offer some form of investment advice to DC plan participants.

Additional findings relating to investment advice:

• More than 40% of survey respondents indicated that they offer some type of investment advice to their DC plan participants.
• Most of the advice programs (84%) are relatively new, in place for three years or less.

"As fiduciaries for many of the nation's largest pension funds, CIEBA of AFP members are  sensitive to the needs of plan participants," said AFP's President and CEO Jim Kaitz. "We are pleased to report these positive trends that demonstrate that CIEBA plan sponsors are responding to concerns about the over concentration of company stock in defined contribution plans, and the need of defined contribution plan participants for better information and guidance."

Fifty-seven of CIEBA of AFP's 120 plan sponsors responded to this March 2003 survey. The median market value of assets for plans in the survey was $2.5 billion.

The Committee on Investment of Employee Benefit Assets (CIEBA) is the voice of the Association for Financial Professionals (AFP) on employee benefit plan asset management and investment issues. CIEBA is a nationally recognized forum for ERISA-governed corporate pension plan sponsors on fiduciary and investment matters. CIEBA members represent 120 of the nation's largest corporate pension funds, managing more than one trillion dollars in assets on behalf of sixteen million plan participants and beneficiaries.

The Association for Financial Professionals in Bethesda, Maryland supports more than 14,000 individual members from a wide range of industries throughout all stages of their careers in various aspects of treasury and financial management. AFP is the preferred resource for financial professionals for continuing education, financial tools and publications, career development, certifications, research, representation to legislators and regulators, and the development of industry standards.

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