December 30, 2008 (The Editor’s Desk is updated each business day.)

401(k) plans and employer stock

A look at the trend in 401(k) investment options over the past two decades shows a steady move away from employer stock as an investment vehicle.

[Chart data—TXT]

BLS data provide some indication of the use of employer stock as a 401(k) investment vehicle. They indicate that workers' exposure to own-employer stock has declined substantially since 1985.

Among funds contributed by employers, a significant fraction of this decline was likely caused by the increased control of the funds given to workers, as shown in the chart. Since employer stock was more prevalent among employer-provided funds with no investment choice than among employer-provided funds in which employees chose investment allocation, the increasing fraction of funds having employee choice caused employer stock exposure to decline.

Another source of decline in workers' exposure to own-employer stock was that, within those plans allowing choice, there was a marked decline in the fraction allowing employer stock as a possibility. This trend applied to both employer- and employee-provided funds.

These data are from the BLS National Compensation Survey program. To learn more, see 401(k) plans move away from employer stock as investment vehicle, by William J. Wiatrowski, Monthly Labor Review, November 2008.