Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

On February 14, 2007, three attorneys from Ropes & Gray spoke in San Francisco, CA on 401(k) plans that contained stock from the company.  

The employer can no longer require the employee to have elective deferrals be invested in company stock.  This was a result of Enron where many employees lost much of their retirement funds because they had elective deferrals invested in Enron stock, and Enron had matching contributions invested in Enron stock.

Participants with more than three years of service must be able to elect into other investment options and diversify employer contributions that are invested in company stock. 

The rules on diversification do not apply to ESOPs.  These are employer funded plans.  If the plan is solely employer funded the diversification rules do not apply.  The rules apply when people are forced to invest their own money in company stock.