Mitarbeiter motivationsprogramm 401-k?

verfasst von XERXES, 12.02.2002, 10:48

SUSAN TOMPOR: 401(k) fallout from Enron’s explosion
Overloading of company stock is found in Michigan
February 11, 2002
BY SUSAN TOMPOR
FREE PRESS COLUMNIST
Anyone who thinks that a 401(k) flameout could only happen at Enron Corp. just needs to look down the road. To Dearborn. Or Troy. Or Southfield.
John Kloian lost nearly half of his 401(k) money in roughly eight months last year. Kloian, an engineer at Ford Motor Co. in Dearborn, had all of his 401(k) money riding on Ford Motor Co. stock. Ford dealt with troubled tires, fierce competition and bad vibes on Wall Street.
"My net worth has really suffered," said Kloian, who has worked for Ford for 10 years. He won't say how much money he's lost. It is a lot.
Yet after watching Ford stock fall from about $30 a share last April to about $14 a share currently, Kloian is not wringing his hands. He says he doesn't want a law to stop people from stuffing too much company stock into a 401(k).
"I'm not looking for the government to save me from myself," Kloian said.
It's folks like Kloian -- and there are plenty of them -- who can make the latest congressional effort to"fix the 401(k)" tricky.
Putting all of your 401(k) money on one company -- the same company that hands you a paycheck -- is a like playing the same number every week in Lotto. One day, you might get lucky. Or not.
Some congressional leaders want a law that limits your holdings of company stock in a 401(k) to 10 percent or 20 percent of the money. So if you've got $40,000 in a 401(k), a proposed law could prevent you from having more than $8,000 in company stock.
But a Free Press study of a dozen major Michigan companies showed that more than half had more than 20 percent of the assets in retirement savings riding on company stock. And only 2 out of 12 had less than 10 percent of the assets in company stock.
Under proposed limits, thousands of Michigan employees could be stopped from buying more company stock. The whole notion of the 401(k) plan has been built on the idea of allowing employees to share in the ownership of their company, make money by investing, and gain financial independence.
Employees can set aside money out of each paycheck, cut down immediately on their tax bill, pick up some extra savings possibly through a company match in cash or stock, and feather their own retirement nest egg.
They do not have to stick around for 30 yearswaiting for a gold watch. They can move on to new jobs, even new careers, and take their 401(k) money with them. Money can be moved from a 401(k) at one company to another, rolled into an IRA or sometimes left in the plan at the old company. People can make their own choices.
Or can they?
The Enron mess -- where a bankrupt and possibly corrupt company destroyed the retirement savings of employees -- has Americans questioning the sensibility of the 401(k) system.
Enron employees loved Enron. So much so, that they loaded up on Enron stock in their 401(k) plans, even though they could have put their money in 18 other mutual funds. Company executives talked up the stock, too.
In late 2000, Enron employees had about 60 percent of their 401(k)s invested in Enron.
When the stock was flying high, they had a shot at retiring at 45 or 50.After Enron crashed last fall, it wiped out nearly $1 billion in 401(k) savings and forced everyone to rethink 401(k)s.
"At Enron, everybody thought the company was going to the moon," said David Wray, president of the Profit Sharing/401(k) Council of America in Chicago, an association of companies that sponsor 401(k) plans.
"With Enron's failure, now the focus is on the potential for loss," he said.
Writing was on the wall
For years, advisers have warned savers not to put more than 10 percent to 20 percent of one's 401(k) in company stock.
Few wanted to listen during Wall Street's bull rush. High risk often led to higher rewards for investorsin a robust market.
T. Michael Dolan, a financial adviser, said he remembers trying to convince a Ford employee to sell Ford stock a few years ago when Ford stock was soaring.
"I told him 'It's pretty hard to tell you that you should reduce the amount of the stock that made you a millionaire. But you should reduce the amount of the stock," said Dolan, vice president for the Society for Lifetime Planning,a company that offers 401(k) advice.
But now a recession and post-Internet bubble have made the stock market a more risky bet.
Enron isn't the only big company out there with a 401(k) fat with company stock. The potential for more Enron trouble is there. One survey found 25 major companies that had more than 60 percent of the retirement savings assets in company stock. Names with heavy company stock holdings include Campbell Soup Co., Procter & Gamble Co. and Target Corp., according to DC Plan Investing, a New York-based newsletter that researches defined-contribution plans.
One reason some plans have a lot of company stock is companies have made healthy matches in company stock when employees contribute to a 401(k). Some retirement savings, including those at Midland-based Dow Chemical Co., also include contributions made for employee stock ownership plans.
Companies like to use company stock in retirement savings plans because it's cheaper than cash.
Another motivator: Company stock in a retirement plan can trigger special corporate tax breaks. Big companies -- including Ford and Procter & Gamble -- save millions of dollars in taxes because they gave away company stock and employees bought even more for retirement plans.
For workers, the risks build because some employees never sell off any company stock -- and buy more on their own.
At Comerica Inc., a Detroit-based banking company,nearly 45 percent of the $520 million in retirement savings was invested in Comerica stock at the end of 2000, the most recent data available. The plan matches employee contributions in stock -- and gives extra stock if corporate performance goals are met.
At Ford, nearly half of $17-billion in retirement savings for hourly and salaried workers was riding on Ford stock at year-end 2000, according to the most recent filings with the Securities and Exchange Commission.
Ford used to match contributions for salaried employees in stock but as part of its cost-cutting efforts it stopped matches this year. Ford's union workers never receiveda match.
Kloian, who could pick from nearly 60 mutual funds in his plan, said he bought Ford stock because he had a lot of faith in the company. And he doesn't like mutual funds.
Because so many workers load up on company stock, Ted Benna, president ofthe 401(k) Association in Bellefonte, Pa., would like to see 401(k) plans that do not allow employees to put any money in company stock.
"Unfortunately, we need to protect people from themselves," Benna said.
Kmart investors hurt, too
Take a drive down to Troy.
Employees at Troy-based Kmart didn't load up as much on company stock as they did at Enron. But as a group, they've still lost millions.
Kmart stock amounted to 14 percent of the $1.3 billion in the 401(k)as of year-end 2001. But when the stock price was higher in 1998, Kmart employees once had nearly 25 percent of their 401(k) -- or about $341 million -- tied up in Kmart stock, according to a Department of Labor report.
Once Kmart filed for bankruptcy protection on Jan. 22, the stock fell below $1 a share. It closed at 98 cents a share on Friday, up 3 cents.
The company stopped making matching contributions, once made in stock, after filing for Chapter 11. But employees still can buy Kmart stock in the plan on their own, if they want. And let's go down the road to Southfield.
Last year, employees at Southfield-based Federal-Mogul Corp. saw their company's stock tortured by worries that mounting asbestos claims might push the auto parts maker to consider bankruptcy protection. And the company ultimately did file for bankruptcy last fall.
Net assets in the Federal-Mogul common stock fund in the 401(k) were cut by more than half -- falling from $56.71 million at the end of 1999 to $20.96 million by the end of 2000, according to an SEC filing last summer.
Federal-Mogul's stock price tumbled from $20.13 a share at year-end 1999 to $2.31 at year-end 2000. It closed at $1.05 a share, up 5 cents, on Friday.
In a highly unusual move, Federal-Mogul prohibited employees from buying any more company stock in their 401(k) plans last summer, before a Chapter 11 bankruptcy filing was made last October. Due to business conditions, the company suspended making any matching contributions last fall.
Three Michigan companies that were part of the Free Press study stood out for company-stock restraint.
One company -- Farmington Hills-based Covansys Corp. -- says it does not offer any company stock in the 401(k) plan. The company matches employee contributions -- 40 cents on the dollar, up to 6 percent of compensation. But the match is in cash, not stock.
"It comes down to having a choice and being diversified," said Craig Love, benefits specialist for Covansys, which has 3,500 employees.
Unlike many big companies, Dow Chemical matches employee contributions with cash, not stock."We have always felt that cash was the appropriate way to give the match. That allowed employees to diversify their holdings," said Geof Kusch, director of global benefits for Dow.
DaimlerChrysler AG -- which suspended its match for salaried workers this year -- also used to give cash, not stock, for matching contributions in the plan. Employees can buy DCX stock in the plan if they want -- but they also have the relatively uncommon ability to buy individual stock in other companies.
Employees everywhere can always sell the company stock that they buy on their own.
What is more difficult than many employees realize is selling shares received in a company match and reinvesting that money elsewhere in the 401(k) plan.
At Kmart, you had to be vested for five years and be at least 55 years old before you could sell off stock received in a match and put the money in another investment option, such as a mutual fund.
At Enron, employees could not sell company stock received as matching funds until they hit age 50.
"What does 50 have to do with anything? Absolutely nothing," Dolan said.
What if the company stock hits a peak when you're 35 years old? Shouldn't you have a right to sell it and lock in some gains?
President George W. Bush wants to let workers sell company stock that employers contributed to the plan after three years.
Other congressional proposals call for allowing workers to sell off the company match after 90 days.
Some Michigan companies already offer pretty liberal policies for selling matching contributions.
Whirlpool Corp. matches in Whirlpool stock but those shares can immediately be sold within the 401(k) and invested in 24 other investment options, including mutual funds, in the plan. How much of the 401(k) is in Whirlpool stock? Usually between 9 and 14 percent, the company said.
At Comerica and General Motors Corp., employees need to hold onto the stock received as a match during the calendar year. So if you get it in November, you can sell it the following January. Your age doesn't matter.
Even Ford -- which has a high level of company stock -- has easy rules for selling. Ford employees need to work at the company for five years. And then they can sell company stock received in a match. And they can trade the stock up to five times a month.
Yet if more people find it easier to sell their company stock, would they do so?
Kloian, at Ford, says some of his coworkers sold off chunks of Ford stock about a year ago when they had a lucky hunch that Ford hit a peak. But Kloian hasn't sold off any of his Ford stock. He's still 100-percent invested in Ford in the 401(k). Kloian hopes that Ford's stock will bounce back.
"I'm not completely writing it off," Kloian said. Kloian, who could retire in a few years, has a pension. So maybe he can take more risk than others.Maybe not.
A huge challenge to revamping the 401(k) system will involve fully understanding how thousands of 401(k)s now work -- and how workers tend to use them.
Put in rules that are too tough and employers could stop giving extra stock -- or cash -- to employees. Do nothing and employees could throw up their hands and stop saving completely.
What we don't need to do is write off 401(k)s completely.
Contact SUSAN TOMPOR at 313-222-8876 or tompor@freepress.com



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• Mitarbeiter motivationsprogramm 401-k? - XERXES, 12.02.2002, 10:48