NextEra workers roll the dice with big bet on company stock

investing.com:

By Tim McLaughlin

(Reuters) — NextEra Energy (NYSE:NEE)'s $5.4 billion retirement plan for employees has suffered about half a billion dollars in losses this year as outsized bets on company stock soured, reflecting ongoing risks of corporate 401(k) policies that encourage concentrated positions in company shares.

America’s largest renewable power company is among several U.S. energy and utility companies, including Exxon (NYSE:XOM) and Southern Company (NYSE:SO), that continue to promote big, concentrated bets on company stock in worker retirement plans.

A Reuters analysis of retirement policies and stock performance data, along with interviews with retirement and finance experts, show a small but prominent corner of Corporate America still plays a risky game with company stock in employee benefit plans even after high-profile corporate implosions like the $63 billion Enron collapse.

Nearly 50% of the investments in NextEra’s employee-funded 401(k) retirement plan are in company stock, the highest among all 30 companies in the S&P 500 Utilities Sector. The total company stock balance across the index is $13 billion, or 14% of $90.4 billion in investments, according to a Reuters analysis of 2022 financial statements.

NextEra's strategy, ill advised by financial advisers and out of favor in most corporate 401(k) plans, generates tax deductions for corporate headquarters while workers shoulder all the risk of a concentrated position in a single stock.

By contrast, 92% of U.S. employee retirement accounts contain no home-company stock, with many companies either not offering their shares for those plans or limiting them, according to a Vanguard Group study of 2022 allocations by 5 million 401(k) participants.

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