Strike a Match Offering company stock in your 401(k) plan can be risky business--learn how to avoid getting burned when playing with matches.

Matching employee contributions in company stock in a 401(k)plan sounds like a surefire move. You gain a competitive tool forattracting and retaining talent and give employees more of a stakein the company's future success. At the same time, you giveyour share price a boost and get a tax break on the contributionwithout having to tie up precious cash.

"I think it's an excellent idea--if you know whyyou're doing it," says Jeff Robertson, attorney withPortland, Oregon, corporate law firm Bullivant Houser BaileyPC. But too often, he says, business owners are motivated bythe tax break and fail to protect themselves from the fiduciaryrisk.

The biggest problem, notes Rick Meigs, president of 401khelpcenter.com--also in Portland--is that abuilt-in conflict of interest exists for companies offering theirown stock in their 401(k) plans. "They have to run theretirement plan exclusively for the benefit of participants andretirees," he says, "but the very next minute,they're trying to protect the company when [there's] badnews." That forces a tough choice: Give employees theinformation they need to adjust their portfolios to their benefit,or withhold bad information to keep the company stock steady. Meigsadds that trial attorneys are beginning to zero in on this issue,looking for class-action cases. Though the lawsuits typicallytarget larger corporations, smaller companies are still atrisk.