Finding the Right Balance with Company Stock

Including company  stock among  the investments  in your 401(k) plan can be powerful.  It gives employees  a voice in the firm’s direction, pride of ownership, and a direct correlation  between their job and company performance. At the same time, employees  should understand how to use company  stock wisely as a 401(k) plan investment.

A few widely publicized corporate bankruptcies in the early 2000s  taught lessons about  over-investing in company  stock. Federal law limits the amount of employer stock in defined  benefit  plans to 10%,  but has no corresponding limit for 401(k) plans. In spite of past lessons, some plans hold a significant percentage of assets in their own company’s stock. According to the Brookings Institute, Sherwin Williams has 62%  of their 401(k) plan assets in employer stock, with Colgate  Palmolive close behind  at 56%.  Companies  with substantial  employer stock holdings in their retirement plans may be risking participants’  retirements if the business takes a downturn, as has occurred  for General Electric. They were recently removed  from the Dow Jones Industrial Average as business results slipped.

If you haven’t done so lately, it could be advisable to examine the percentage of assets invested in company stock in your own plan. And make it the subject of employee investment  education. By doing so, you can help employees make informed  decisions about company stock investments, and at the same time, maintain  the benefits of employee ownership.

Read this op-ed  from the Brookings Institute for more information:

Plan Sponsor’s Quarterly Calendar


  • Send payroll and employee census data to the plan’s recordkeeper for plan-year-end compliance testing (calendar-year plans).
  • Audit fourth quarter  payroll and plan deposit dates  to ensure compliance with the Department of Labor’s rules regarding timely deposit of participant  contributions and loan repayments.
  • Verify that employees who became  eligible for the plan between October  1 and December 31 received and returned an enrollment  form. Follow up for forms that  were not returned.


  • Update the plan’s ERISA fidelity bond coverage to reflect the plan’s assets as of December 31 (calendar-year  plans). Remember  that  if the plan holds employer stock, bond coverage is higher than  for non-stock plans.
  • Issue a reminder memo or email to all employees to encourage them to review and update, if necessary, their beneficiary designations  for all benefit  plans by which they are covered.
  • Review and revise the roster of all plan fiduciaries and confirm each individual’s responsibilities and duties to the plan in writing. Ensure than each fiduciary understands his or her obligations  to the plan.


  • Begin planning for the timely completion and submission of the plan’s Form 5500  and, if required,  a plan audit (calendar-year plans). Consider, if appropriate, the Department of Labor’s small plan audit waiver requirements.
  • Review all outstanding participant plan loans to determine if there  are any delinquent payments.  Also, confirm that  each loan’s repayment period and the amount borrowed comply with legal limits.
  • Check bulletin boards and display racks to make sure that posters and other plan materials are conspicuously posted  and readily available to employees, and that information is complete and current.

Consult your plan’s financial, legal or tax advisor regarding these and other items that may apply to your plan.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; 877-306-5055;

© 2018 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law, or ruling as it applies to a specific plan or situation. Plan sponsors should always consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.