Breaking up is tough.(R.J. Reynolds Tobacco Co.'s securities diversion case)(Editorial)

Pensions & Investments, January, 2005

The appellate court ruling in the R.J. Reynolds Tobacco Co. case is clear - companies that offer their own stock in their 401(k) plans do so at their own peril. They ought to proceed carefully, recognizing that the interest of the participant in the investment is paramount over other concerns.

Corporate executives, more than anyone else, should recognize the dynamic nature of a company's structure. There are frequent acquisitions and sales of corporate assets, involving entire business units and thousands of employees, sometimes disconnecting a company stock fund for some employees from the plan sponsor, as was the case with R.J. Reynolds and Nabisco. Corporate restructuring is fraught with complications for 401(k) plans. In the RJR case, the company sold...

Read the rest of this article with a Free Trial at HighBeam Research.

Premium Content Partnership | HighBeam Research provides an in-depth online archive library of reference works.