Changes in 401(k) Plans Could Affect Employee Ownership

Legislation before the House Ways and Means Committee, considered likely to pass, would eliminate anti-discrimination provisions of Section 401(k) plans. Currently, the amount high-income people can contribute is limited by how much lower-paid workers contribute. The proposal would allow higher-paid people to defer as much as they wanted, provided that the company makes a minimum 1% contribution to all participants. The change would mean that companies would not have to make the effort they now do to induce lower-paid employees to participate in 401(k) plans. That is usually done through employer matches to employee contributions, matches often made in company stock.