Actually, since I'm not an investor in Enron stock, much less one of their 401-K retirement programs, I haven't given the subject much thought.
But I surely have heard a lot of screaming and shouting from the chattering classes.
So what's the deal with Enron's 401-K retirement program? Was the 'fix' in, that permitted some Enron employees to sell their stock (the 'bigwigs'), but denied that right to others (the 'little people').
Here's an article that explains it all rather nicely!
[size=4]Enron’s 401(k) Calamity[/size=4]
[b]Enron’s retirement meltdown is tragic. We don’t yet know if it’s criminal.[/b]
By Michael W. Lynch
"The human impact is staggering," writes CNN’s Bill Press of the Enron collapse. Press details the losses to investors and loss of jobs before landing on the 401(k) wipeout. "Those 11,000 employees whose 401(k) funds were invested exclusively in Enron -- and who were forbidden by Enron’s own rules from diversifying -- today have no retirement plan at all."
The misinformation is staggering as well. Nothing that Press, a Democratic hack who earns his living turning every world event to partisan advantage, says about the 401(k) plan is true. Eleven thousand employees participated in Enron’s plan, which offered a range of investment options. These employees were not invested exclusively in Enron stock, and they were not forbidden from diversifying. It is illegal for a company to force any employee to use more than 1 percent of salary to purchase stock, and as a practical matter, none do.
Press’s claims are extreme, but not wildly unrepresentative of others made about Enron’s 401(k) disaster. And people are demanding action. New York Times columnist Paul Krugman has used Enron to call into question the whole idea of defined-contribution pensions. "It’s easy to make the theoretical case for defined-contribution plans," writes Krugman. But he later adds that "the sad fate of Enron’s employees highlights the difference between theory and practice."
He’s not alone. "One issue raised by the whole Enron debacle is how realistic is the concept of do-it-yourself investing," Karen Ferguson, director of the Pension Rights Center, told The New York Times. And members of Congress have rushed to legislate our way to financial safety. In the Senate, Jon Corzine (D-N.J.) and Barbara Boxer (D-Calif.) want to limit the amount of employer stock that can be held in 401(k) plans to 20 percent of the total investment. In the House, Peter Deutsch (D-Fla.) and Gene Green (D-Texas) want to set the cap at 10 percent.
Here are some facts. Enron maintained a rather typical 401(k) plan for a company of its size. It offered a selection of 20 investment options, Enron stock being one among them. It matched 50 percent of employee contributions up to 6 percent of salary with Enron stock. (And remember, the employee’s own contribution didn’t have to be invested in Enron stock.)
Employees couldn’t sell stock that Enron gave them until they turned 50. They were not prohibited from selling Enron stock that they purchased with their own money. At the end of 2000, 62 percent of the value of employee 401(k) plans were held in Enron stock. (This is risky, but not unique. Procter & Gamble’s fund is 95 percent company stock, according to a recent survey by DC Plan Investing. General Electric’s is 77 percent.)
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