When a colleague and I wrote a book on 401 plans in 2004, we devoted a whole chapter to the perils of investing 401 assets in company stock.
Indeed, Vanguard data show that this “squeezing-out” phenomenon, combined with sponsor recognition of the risks of single-stock investment, has resulted in a big decline in both the percentage of plan sponsors actively offering company stock — from 12% in 2005 to 8% in 2022 — and the percentage of participants with company stock.
Third — probably less important given employee inertia — the Pension Protection Act of 2006 expanded diversification rights for participants so that they could sell their own company stock at any time and employer contributions of company stock after three years.
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