Recently the U.S. Supreme Court announced that it will review Fifth Third Bancorp v. Duddenhoeffer, a case about the appropriateness of offering company stock in a 401(k) plan. Why would the federal government be concerned about company stock in 401(k) plans? Following are some potential reasons:
1. Company stock is risky. In a typical 401(k) plan that offers all mutual fund investment options, company stock sticks out as a very risky investment option. Due to potentially volatile price swings (which could include falling to worthlessness) investing a significant portion of a 401(k) plan balance in company stock is generally not a good investment strategy for most plan participants.
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