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After Enron's Fall, Indianans Rethink 401(k) Plans.
Byline: Chris O'Malley
Jan. 18--Millions of workers whose 401(k) plans contain their employer's stock might be setting themselves up for a double whammy should their company's shares vaporize as did those of Enron Corp.
Nearly half of employers nationwide now make matching contributions exclusively in their own stock -- and often require employees to hold it for decades before reinvesting it.
On top of that, many workers make the mistake of buying far too many additional shares of company stock with their discretionary contributions to the savings plans.
The result is an alarming lack of diversification.
"For most people, you simply don't want to be involved with a large part of your assets tied up in company stock," said Charles Trzcinka, a finance professor at Indiana University's Kelley School of Business.
"Employees should treat that like not having a pension plan. It's like a lottery ticket. What the company is doing is giving you a salary plus a lottery ticket," Trzcinka added.
Enron was the seventh-largest company in the Fortune 500 and a company hardly seen as a house of cards until it…
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Source: HighBeam Research, After Enron's Fall, Indianans Rethink 401(k) Plans.
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