What are the implications if the employer's contribution to the 401(k) plan is made in stock rather than in cash? What are the advantages and disadvantages?
A company may contribute its own stock to a 401(k) plan with a advantage to the company of not having to surrender cash to the retirement plan. From the employer side, the transfer of stock to the plan could possibly affect some financial ratios because the total shares outstanding would be less after the transfer, but the concept still may be better than cash. Another point is that companies often buy ...
Using Enron as a example, the solution explains the potential negative effects of using company stock to fund a 401(k) plan.