Trends in Company Stock in Public Company Retirement Plans

In a May 31 article in Morningstar, Company Stock Ownership: The Risks Outweigh the Rewards, Mark Miller cites unpublished research by Vanguard that finds 90% of participants in defined contribution plans administered by Vanguard have no company stock in their retirement accounts, and 5% have 20% or more of their account in company stock. Miller argues that diversification is a good reason to minimize the amount of company stock in retirement accounts. Diversification is a solid principle in retirement planning, but especially in the case of private companies, it is not the only relevant point. Private companies with ESOPs are more likely to offer diversified plans in addition to their ESOPs. ESOPs are much more likely to be funded solely by the employer, and those employers also tend to contribute to such plans at above-average levels. See the NCEO article Are ESOPs Good Retirement Plans?.