Company Stock

Company Stock Held in Defined Contribution Plans

As independent fiduciary of a company stock fund in a 401(k) plan, Fiduciary Counselors is typically appointed as a named fiduciary and investment manager with respect to the stock fund. Fiduciary Counselors’ responsibilities typically include:

  • Monitoring the company’s financial condition to determine whether participants should be permitted to make new investments in company stock;
  • Determining whether holding company stock in the Plans is no longer consistent with ERISA and, if so, determining how to liquidate the Plan’s holdings in company stock;
  • Ensuring compliance with respect to the confidentiality requirements under section 404(c) of ERISA; and
  • Proxy voting for unallocated shares and shares for which no participant direction is received.

In performing our services as an independent fiduciary, we would act in accordance with the terms of the plan, including the plan’s provisions relating to investment in company stock, unless doing so would be inconsistent with Title I of ERISA.

We have expertise and experience in managing the company stock of troubled companies and companies in bankruptcy. That being said, the funds we manage include employer stock of companies ranging from investment-grade to non-investment grade.

We currently manage over $4 billion in company stock for defined contribution plans.

Company Stock Held in Defined Benefit Plans

We believe that holdings in employer stock can be appropriate subject to certain limitations. Ordinarily, Department of Labor regulations limit the holding of employer securities to 10% of fund assets. A fund’s investment policy statement may have additional restrictions. Fiduciary Counselors manages employer stock positions over time to ensure that the fund benefits from its holding and to allow for appropriate diversification of assets.

Fiduciary Counselors can be retained to determine if accepting a contribution of employer securities is in the best interests of plan participants or to manage an existing position. Factors used in determining whether to accept, continue to maintain or sell company stock holdings are:

  • Financial condition of the company
  • Credit ratings or credit metrics
  • Availability of timely, reliable company financial information
  • Various valuation measures and business fundamentals
  • Analyst expectations regarding earnings and stock performance
  • Company stock holdings as a percentage of pension plan assets

Fiduciary Counselors considers these factors as it tries to manage the plan’s exposure to company stock over time.

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