Another Estimate on 401(k) Employee Ownership

A new study estimates the amount of employer stock held in 401(k) plans to be higher than previously reported. The Institute of Management and Administration, an organization specializing in defined contribution plan administration, reported in its May 1995 newsletter on a study of 401(k) plan sponsors with over $200 million in plan assets. Based on 1995 data from 355 firms, it found that 70% offer company stock as an investment option and that employees have more than $255 billion invested in company stock in these plans. This number appears to include employer matches. It constitutes 41% of the total holdings in these plans. This number is considerably higher than estimates provided by Douglas Kruse of Rutgers, who relied on 1992 Department of Labor reports. The IOMA data suggest total employee holdings through 401(k) plans may well exceed $350 billion in employer stock, over three times the 1992 totals Kruse reported. For the year before the survey, the employer stock investment slightly underperformed the S&P, although its risk-adjusted return would be lower.