ERISA prohibits defined benefit plans (and money purchase pension plans other than pre-ERISA plans) from acquiring employer stock if, after the acquisition, more than 10 percent of the assets of the plan would be invested in employer stock.

Most defined contribution plans, such as profit-sharing plans, stock bonus plans, pre-ERISA money purchase plans, 401(k) plans and ESOPs, generally are not subject to this 10-percent limitation. Plans that are not subject to the 10-percent limitation are referred to in ERISA as "eligible individual account plans." The 10% limitation may apply to some 401(k) plans in which participants do not have investment discretion. There is no limit on the amount that a participant can choose voluntarily to invest in employer stock in an eligible individual account plan.