By Mark Miller
CHICAGO (Reuters) – The decision marked the end of an era: last month, the keepers of the removed General Electric (NYSE:) Co, one of the original stocks included in the index when it was created in 1896.
The once-mighty GE had become the sixth-smallest member of the 30-component Dow by market value and carried the index’s lowest stock price.
The move by S&P Dow Jones Indices reflected the decline of an American industrial icon. But the company’s plunging stock highlights a problem that refuses to go away: too much concentration of employer stock in workplace retirement plans.
More than one-third of GE 401(k) plan assets were held in the company’s own shares in 2016, federal filings show.
Just 15 years ago, GE was the world’s most valuable public company. But it has struggled in several of its key industrial markets and suffered losses in the financial services business during the global financial meltdown of 2008.
GE stock has fallen nearly 80 percent from highs in 2000, serving up a reminder of the risk of holding your employer’s stock in a retirement account.
Changes in federal law have encouraged retirement plans to move away from company stock ownership, and a spate of lawsuits also have helped convince many plan sponsors to reduce or eliminate the practice.
Data from Vanguard points to an encouraging trend. In 2017, among all account-holders in defined contribution plans administered by the mutual fund giant, 90 percent had no investments in their employer’s shares, either because it was not offered (76 percent) or they chose not to invest in it (14 percent).