Employer Stock in 401(k) Plans Drops

A new, definitive study of employee investments in 401(k) plans shows that the percentage of allocations going to company stock has gradually declined from a high of 19% in 1996 to 15% in 2004. Moreover, younger workers are less likely to invest in company stock than older ones. The data are reported in "401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2004," issued by the Employee Benefit Research Institute and the Investment Company Institute. Their dataset includes 16.3 million 401(k) participants in 45,783 plans, or about 38% of all private sector employees participating in these plans.

Just under 48% of the participants in the study work for companies that offer company stock in their plans. The list below shows the percentages of plan assets held in company stock by employees of such companies:

• 80% or more: 11.2%
• 40% to 80%: 15.1%
• 20% to 40%: 14.3%
• 1% to 20%: 22.6%
• Zero: 36.7%

Extrapolating from the data, it appears that about 13 million employees own at least some company stock in their 401(k) plans, and about three million of these invest at least half their plan allocations in employer stock.