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The Pension ChallengeRisk Transfers and Retirement Income Security$
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Olivia S. Mitchell and Kent Smetters

Print publication date: 2003

Print ISBN-13: 9780199266913

Published to Oxford Scholarship Online: August 2004

DOI: 10.1093/0199266913.001.0001

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The Role of Company Stock in Defined Contribution Plans

The Role of Company Stock in Defined Contribution Plans

Chapter:
(p.33) Chapter 3 The Role of Company Stock in Defined Contribution Plans
Source:
The Pension Challenge
Author(s):

Olivia S. Mitchell (Contributor Webpage)

Kent Smetters (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/0199266913.003.0003

This chapter examines the holding patterns of company stock in defined contribution (DC) plans, why employers and employees tolerate high levels of company stock holdings, and the impact of concentrated holdings on retirement incomes. It is argued that retirement systems with concentrated stock positions will always have some participants lose their DC plan savings to firm bankruptcy. Company stock in retirement portfolios leads to greater extremes in accumulated wealth due to its higher volatility, and a lower median wealth compared to a system of diverse investments.

Keywords:   defined contribution plans, retirement plans, employee stock ownership, investment portfolio, company stock

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