A big bankruptcy raises big concerns

But larger reform measures involving actions of corporate boards - which led to the Enron failure to begin with - are far from guaranteed. Regulators, lawmakers, and the White House are all talking reform, but don't count on it happening anytime soon, says Sarah Teslik, executive director of the Council of Institutional Investors, a trade group in Washington. "People in power [such as lawmakers, the SEC, etc.], don't actually want it to happen," she says.

One reason: Ex-lawmakers often pop up on corporate boards when they retire. The last thing they want, Ms. Teslik believes, is stiff disclosure regulations for board members.

Do many companies use company stock as a primary component of their 401(k) plans?

Yes. Some 43 percent of the savings in retirement plans maintained by the nation's largest companies are invested in company stock, according to the Profit Sharing/401(k) Council of America. Companies include Proctor & Gamble, Coca-Cola, Sherwin Williams, McDonald's, and Pfizer, to name a few.

How do you prevent your 401(k) from going under if your company suddenly goes bankrupt?

"You have to diversify," says Maria Crawford Scott, editor of the AAII Journal, Chicago. Opt to put your contributions into noncompany stock, such as mutual funds, even if it means giving up the company match. Consider contributing to international funds, bond funds, perhaps a money-market fund, all within your 401(k). And try not to duplicate stocks in the same industry for which you work.

Are 401(k) plans federally inspected and insured?

Yes and no. The plans must meet specified federal guidelines regarding their administration and structure. But they are not monitored by inspectors on a daily basis or protected against market losses. Unlike bank accounts, 401(k)s are not federally insured.

What if I don't understand my employer's plan?

"Get a copy of the summary plan for your program" from your employer, says David Powell, a partner with the Groom Law Group, in Washington. Then see "what rights you have regarding investment and reinvestment of your assets."

My pension plan lost money by investing in Enron stock. Will it be able to get any of that money back?

Possibly. Some pension plans may join class-action lawsuits against Enron. But it is unlikely that there will be much extra cash to distribute, even if your pension plan wins in court, analysts say. The reason is that in bankruptcy proceedings, secured creditors traditionally have first dibs against remaining corporate assets. That means little or nothing will be left over for shareholders.

Still, most investors in pension plans won't really notice the difference. Case in point: The Missouri state employees retirement fund lost some $9 million due to Enron's bankruptcy. But that amounts to only about 0.2 percent of the $5 billion fund.

Page: 1 | 2