Can employees typically choose how their 401(k) funds are invested, and how often can those funds be invested in company stock?

Of workers that participate in savings and thrift plans, 91 percent may choose how their funds are invested and 65 percent may choose how the employer’s matching funds are invested, according to 2000 data on benefits from the National Compensation Survey. Savings and thrift programs include pre-tax features established under the provisions of Section 401(k) of the Internal Revenue Code.

Nine out of ten employees were able choose among various investment vehicles for their own contributions and nearly two-thirds had this ability for contributions made by their employer. About two out of five employees had the option of investing their own contributions in company stock, while one of five had that option with their employers’ contribution. The other choices might include common stock funds, bond funds, government securities, and guaranteed investment contracts. Many employees had the ability to choose among ten or more investment choices. Typically, plan participants who were allowed to choose their own investments could allocate those investments in any manner. (See table 1.)

Nearly all plan participants are able to allocate their investments at least four times a year. The great majority of plans allow for an unlimited number of changes. Employees are typically able to allocate their own contributions more frequently than their employer’s matching contribution.

The share of participants in savings and thrift plans who are permitted to choose investments for their own contributions have remained consistent at about 9 out of 10 since 1985. During the same period, the share of employees permitted to choose investments for their employer’s matching contribution has risen from about half to nearly two-thirds. The ability of employees to choose company stock as one of their investment options has dropped sharply during the past 15 years. For employee contributions, only 4 out of 10 employees can choose company stock as an investment choice in 2000, compared with 7 out of 10 in 1985. Employee choice of company stock as an investment choice for employer matching funds fell two-thirds, from 61 percent in 1985 to 20 percent in 2000. (See table 2.)

The following links provide more statistical information on 401(k) plans:

http://www.bls.gov/opub/cwc/archive.htm

http://www.bls.gov/ncs/ebs/home.htm

The following link provides additional sources of information on retirement plans from the Department of Labor:

http://www.dol.gov/ebsa/consumer_info_pension.html

Table 1. Percent of full-time employees participating in savings and thrift plans, by details of investment provisions, all private establishments, 2000

Table 2. Percent of full-time employees participating in savings and thrift plans by ability to choose investments, 1985-2000

Last Modified Date: May 2, 2003