Employees used to buy a lot more of their companies’stock—purchasing shares through their 401(k)s—but that’s been changing.

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Now instead of loading up their retirement plans with stock,they’re buying shares through an employee stock purchase plan.

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That’s according to new research from Fidelity, whichidentifies the trend as a positive one.

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The danger of having too much company stock in a retirement planwas highlighted in a particularly spectacular way with the downfallof Enron, and experts have been advocating for years now forgreater diversification in 401(k)s rather than relying on companystock.

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It seems that at least some employees have gotten the message.Fidelity’s research tracks the evolution of company stock within401(k) plans over the past 10 years, and findschanges in three areas:

  • how many employers offer company stock through their 401(k)

  • how many employees invest in company stock through their401(k)

  • how much of employees’ 401(k) savings is held in companystock

Not only has the percentage of employees with company stock intheir 401(k) fallen by nearly half, but the number of employersoffering company stock through their 401(k)s has alsodropped—although not by as large a proportion.

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In 2005, 41 percent of employees held company stock in theirretirement accounts, but by 2016 that had fallen to just 23percent. And while 28 percent of employers as of 2016 still offeredcompany stock in 401(k)s, that has fallen from 39 percent in2005.

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And the concentrations held in stock are lower, too, with just 9percent of employee 401(k) assets in company stock in 2016,compared with 16 percent in 2005.

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Instead employees are turning to ESPPs to buy company stock.They’re still optimistic about its value, with 83 percent ofemployees who participate in their company stock plan expecting thevalue of their company’s stock to increase over the next few years.In addition, while 52 percent say they expect a modest increase inthe stock’s value, 21 percent expect the value to increase“substantially” in the next 24 months.

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Buying the stock in an ESPP rather than in a 401(k) isbeneficial to retirement plans because it lessens the likelihoodthat employees will raid retirement savings to get emergencycash.

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Employees who participate in their company’s ESPP are threetimes more likely to sell company stock for emergency cash, theanalysis reveals, rather than take a loan from their 401(k), and 52percent added that it was “highly unlikely” they would tap their401(k) if they needed cash.

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Another advantage is that stock is more easily accessible in anESPP than in a 401(k), and employees say they draw on it to helppay down debt, add to retirement savings, finance real estate orhome improvement projects or just set the money aside for a rainyday.

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