New Study Looks at Company Stock in 401(k) Plans

The Employee Benefit Research Institute reports that company stock comprised 7.4% of 401(k) assets in 2012, continuing a decline from close to 20% in the late 1990s. The report, 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2012, is based on an analysis of 24 million plan participants.

The report finds that 36% of the employees in the database had access to company stock in their 401(k) plans. In these plans, 18.3% of assets were in company stock. Seventy-six percent of participants had less than 20% of their assets in company stock, and 54% had none. Seven percent had more than 80% of their assets in company stock.

Recently hired employees are increasingly unlikely to invest in company stock when offered. Close to 75% of all employees with two years or less of service had no company stock in their accounts. In 1999, 24% of recently hired employees had a majority of their assets in company stock; in 2102, that number dropped to 8.4%. Similarly, older employees are much more likely to be invested in company stock than younger ones.

Changes in the law allowing employees to easily move out of company stock and greater concerns about well-publicized failures of companies where employee were heavily invested in company stock appear to be the prime drivers of these trends.