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 76 percent may choose how the employer’s matching funds are invested, according to 2005 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 over three-fourths had this ability for contributions made by their employer. One in four 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.

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 over three-fourths. The ability of employees to choose company stock as one of their investment options has dropped sharply during the past 20 years. For employee contributions, only one in four employees can choose company stock as an investment choice in 2005, 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 19 percent in 2005. (See table 1.)

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

www.bls.gov/opub/mlr/department/article.htm

www.bls.gov/ncs/ebs/

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

www.dol.gov/agencies/ebsa

 

Table 1. Percent of full-time employees participating in savings and thrift plans by ability to choose investments, 1985-2005

Provision	1985	1989	1993	1997	2000	2005
Employee contributions:
Investment choice	90	90	86	87	91	91
Choice of company stock	70	60	48	42	38	25
Employer contributions:
Investment choice	48	53	58	65	65	76
Choice of company stock	61	50	38	25	20	19

Note: Surveys conducted in 1985 through 1997 included medium and large private establishments with 100 employees or more. The 2000 and 2005 surveys included all private establishments.

 

Last Modified Date: November 3, 2008