Investing in Company Stock 401(k) Any limits?

[Guest SPrince]

Have a public but bulletin board traded company client who wants to permit its 401(k) contributions to be invested in company stock. Are there limits on this? Any new legislation in this area? Thanks

[BeckyMiller]

401(k) plans can be either profit sharing or stock bonus plans. Either basic plan type can satisfy the conditions of ERISA to be an "eligible individual account plan." See ERISA Section 407(d)(3). Plans which are meet the conditions of an "eligible individual account plan" are permitted to invest in "qualifying employer securities." Such investments remain subject to prudence, except they may be exempt from diversification, depending upon how the plan is drafted.

Next step is to get good ERISA legal advice and probably securities advise on how to proceed or not.