Question about employer stock?

[Guest lawdawg]

Do you think there are some serious fiduciary problems with the following? An employer requires employees who invest their 401(k) deferrals into employer stock must hold that stock for three years before they can sell? Just doesn't smell right to me.

[MWeddell]

The plan (or at least the portion invested in employer securities) should be designated as an ESOP. If it isn't, it's likely that there's a violation of ERISA 407(B), because the other exceptions don't often apply.

If the plan document is appropriately drafted, then the fact that the investment is undiverisifed is not regarded as a fiduciary violation. See ERISA 404(a)(2). One still can challenge the investment in company stock as not prudent.

I wouldn't like this plan design if I were a participant, but it's hard to demonstrate that it's a fiduciary violation under ERISA.