More Firms Ease 401(k) Rules for Employer Stock

More companies are making it easier for their workers to reduce the amount of company stock they hold in their 401(k) plans--an effort to prevent a repeat of the retirement-savings meltdown that occurred at Enron Corp.

Gillette Co. and media giants AOL Time Warner Inc. and Walt Disney Co. said they will let employees invest matching retirement funds in shares other than company stock. Gillette and AOL Time Warner relaxed their rules this month. Disney made the change March 8.

Congress is considering proposals to limit the amount of company stock that workers can own in their retirement plans.

Enron employees lost an estimated $3 billion in savings after the energy trader filed for bankruptcy protection and its stock plunged to less than $1 from $80. About 62% of Enron’s 401(k) plan was invested in company stock.

The changes in retirement plan rules may reflect companies’ concern about appearing to push purchases of their shares after the losses at Enron, analysts said.

“Most companies are going to be very wary of anything that suggests the promotion of their own stock,” said mutual fund consultant Burt Greenwald.

A spokesman for Boston-based Gillette said the change in its 401(k) rules was unrelated to Enron or other issues. Gillette matches a percentage of employee contributions to savings plans with company stock. Before the regulations were changed, employees could not sell the stock until they reached a certain age. Now they can sell the stock and transfer it to one of the other funds in the plan.

At AOL Time Warner, which also matches contributions with its stock, employees couldn’t switch to other investments until they were 50 years old and had been with the company for at least five years. Now, employees can invest the company contribution in any of 100 mutual funds, the company said.

Disney’s policy is to match 50% of the first 4% an employee contributes to the retirement plan, the company said. That match will still be paid in company stock, but employees now have the option to transfer it into other funds offered under the 401(k) plan.

Other companies have made similar changes to their 401(k) plans recently, including Gannett Co. and International Paper Co.