The best weapon for protecting employees in 401(k) plans may be the threat of litigation, not legislation or regulation, according to the San Francisco Chronicle.

The Chronicle notes that employees and former employees of Enron, Lucent Technologies, Ikon Office Solutions, Nortel Networks and Providian have filed suits alleging breach of fiduciary duty in their 401(k) plans. All the suits revolve around losses in company stock.

Although there have been very few lawsuits won against employers who sponsor 401(k) plans, some experts tell the newspaper that the mere threat of litigation may cause some firms to loosen restrictions on company stock.

Lawsuits "are distracting and costly," said David Wray, president of the Profit Sharing/401(k) Council of America, which represents plan sponsors.

As an example, the Chronicle points to the recent actions of Providian. It changed the terms of its 401(k) plan on Jan. 1, just a few days after it was named in a 401(k) lawsuit. Previously, employees could not sell company stock they acquired through a company match until they left Providian. Now, they can sell the stock as soon as it has vested.

Wray doubts that Providian changed its plan in response to the lawsuit. "Companies don't make lightning-like decisions." he said. "My guess is that was in the works."

Some companies are changing their plans even without being sued. In late January, Diebold Inc., which makes automated teller machines, said it would let employees sell company stock they acquired in a company match after one year, instead of having to wait until age 55.

John Doyle, a spokesman for T. Rowe Price retirement plan services, said about 20 percent of the 401(k) plans his firm administers offer company stock.

Among those that restrict the sale of company stock, few have made changes since the Enron disaster, but many are considering it.

"I think the (legal) liability is definitely weighing on their decisions," he said, but so is proposed legislation that would cap the amount of stock permitted in 401(k) plans.

To read the San Francisco Chronicle article, click
"http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/02/12/BUPENDER12.DTL&type=business" target="_blank">here.