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You say: 'No company is going to contribute cash.' Actually, private
companies contribute cash all the time.
Regards
DanG
Kent Rollins wrote:
>
> The only reason Congress is even addressing this is because of the Enron
> thing. What about the 401k's of the employees of EMC, Cisco, all the
> dot-bombs, etc.? Are they not down 90% or more as well?
>
> And the news-idiots are running around making it worse by saying that people
> have "lost their entire life savings". WRONG!!! They lost the company
> match in their 401k. That's all. The still have their original
> contribution to the 401k, they still have their houses, they still have any
> other savings plans they had created. The only thing they lost was the
> money the company (Enron) GAVE THEM as an incentive to save.
>
> Now Congress wants to limit the amount of company stock held in 401k plans
> to 25% or 30%. I worked for a Fortune 100 company where the company match
> varied from 50% to 100% of my contribution depending on the profitability of
> the company. That by definition means that they were contributing more to
> my account than Congress wants to allow them to contribute. No company is
> going to contribute cash. So companies will just contribute less. And if
> your cash contribution goes down because of bad investments, the company
> will be able to contribute even less.
>
> Typical government reaction: remove risk, eliminate opportunity for wealth
> creation. There are also tax implications (aka government revenue) with
> company matches. The beneficiary doesn't have to pay taxes on the receipt
> until retirement. I don't know how the company is allowed to treat the
> contribution.
>
> As for existing 401k's, if Congress does pass this limitation, I doubt it
> would force people to sell company stock to reduce to the required
> percentage but the company would not be allowed to reward them with any more
> stock. And people who have done well with their company stock are not going
> to be likely to sell. They'll be more likely to "let it ride" then run to
> government if they crash.
>
> Kent
>
> ----- Original Message -----
> From: "Daniel Goncharoff" <thegonch@xxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Friday, January 18, 2002 7:50 PM
> Subject: [RT] 401k Reaction
>
> I notice the general media is starting to concentrate on the harm
> suffered by Enron employees that had large investments in company stock
> in their 401k and were burned when the manager was changed (freezing the
> accounts) at the same time the stock plummeted to almost nothing. Advice
> is being given for employees of other companies to look at their own
> 401k and diversify.
>
> My gut reaction is that this has to be bad for stocks and good for
> bonds, given the current condition of the stock market and the likely
> conservatism of the 401k holders. (Once you have made the decision to
> diversify, are you really likely to do so in a risky fashion?)
>
> Does anyone have any thoughts about how individual stocks may be
> affected? I would think recently successful companies will be more prone
> to being 'diversified down', companies that have done very well over the
> last 3-5 years. These companies will be more prone to having created
> large involuntary concentrations of risk for their employees accounts.
>
> The ultimate example may be MSFT, which has continued to make its
> employees very wealthy, has been successful in any reasonable time frame
> you choose, and is now subject to ongoing legal action of indeterminate
> size. Would you keep you millions in retirement dough in MSFT stock, or
> would you, in light of the Enron case, look to sell MSFT and put your
> money elsewhere?
>
> Your thoughts would be appreciated
>
> Regards
> DanG
>
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