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401(k) stock notification rule implemented

Posted On: Aug. 10, 2007 12:00 AM CST

WASHINGTON--Final Labor Department rules issued Friday implement a provision in last year's pension funding reform law that require employers to notify employees of their right to sell company stock given by their employers as a 401(k) plan matching contribution and reinvest the proceeds into other investment options offered by their plans.

Under the Pension Protection Act, employees must be allowed to divest company stock contributed as a match after three years of service. Employers can be fined up to $100 a day per affected plan participant for failure to provide the notification.

The diversification requirement was a congressional reaction to provisions in one-time energy giant Enron Corp.'s 401(k) plan in which Enron matched employees' salary deferrals in company stock and then barred employees from selling the shares until they reached age 50. The shares later became worthless when Enron collapsed.