Maybe. A small investment in employer stock may be legal. For example, if you have a defined benefit plan your employer stock is limited to 10%. If you have a 401k or other defined contribution plan, the law is in flux as of Spring 2008.  The IRS has proposed regulations that, were they to be adopted, would prohibit employer stock from constituting more than 10% of some types of plans, among other changes, beginning in 2009.

However, certain types of retirement plans are specifically designed to invest in employer stock such as an Employee Stock Option Plan, commonly referred to as an "ESOP" which probably are not affected by the new rules.  Check with a financial advisor or attorney for the latest news on this changing topic.

(Reviewed 9-08)