Private Pensions: Participants Need Information on the Risks of Investing in Employer Securities and the Benefits of Diversification Page: 4 of 57
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Accountability * Integrity * Reliability
United States General Accounting Office
Washington, DC 20548
September 6, 2002
The Honorable Paul S. Sarbanes
Committee on Banking, Housing, and Urban Affairs
United States Senate
Dear Mr. Chairman:
The financial collapse of the Enron Corporation and other large firms and
the effects on workers and retirees has raised questions about retirement
funds being invested in employer securities and the laws governing such
investments. Pensions are an important source of income for many
retirees, and the federal government has encouraged employers to sponsor
and maintain pension and savings plans for their employees. Over 70
million U.S. workers participate in pension and savings plans, and such
plans in 1998 represented about $4 trillion in retirement savings. The
continued growth in these plans and their vulnerabilities has caused
Congress to focus on issues related to participants investing in employer
securities through employer-sponsored retirement plans.
Enron's plan participants held a substantial percentage of their retirement
assets in employer securities. Because of the financial losses suffered by
Enron plan participants and the potential for losses to be incurred by
participants in retirement and savings plans that are highly concentrated
in employer securities, you asked us to: (1) determine the number, types,
and dollar amounts of private pension plans that invest in employer
securities; (2) describe why investing in employer securities through
employer-sponsored plans can pose risks to plan participants; and
(3) describe the regulatory provisions for disclosures to participants
owning employer securities through their employer-sponsored plans. You
also asked us to discuss the Securities and Exchange Commission's (SEC)
administrative determination not to explore the application of the
Securities Act of 1933 and the Securities Exchange Act of 1934 to
retirement plans. This information is presented in appendix III.
To determine the number and types of private pension plans invested in
employer securities, we analyzed plan financial information filed annually
(Form 5500s) with the Department of Labor's Pension and Welfare
Benefits Administration (PWBA). We analyzed data for the Fortune 1,000
companies for plan year 1998, which was the most recent year for which
GAO-02-943 Private Pensions
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United States. General Accounting Office. Private Pensions: Participants Need Information on the Risks of Investing in Employer Securities and the Benefits of Diversification, report, September 6, 2002; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc295308/m1/4/: accessed November 15, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.