If the plan is an ESOP, then there is no limit on the amount of an employee's contribution that can be required to be invested in employer stock without the participant's consent. If the plan is not an ESOP and the plan provides for investment in employer stock other than by participant choice, then the 10-percent limit on investment of plan assets in employer stock applies to employee contributions (and earnings) as if they were a separate plan. That is, the portion of such a plan that consists of employee elective 401(k) contributions (and earnings) is subject to the 10-percent limitation.

This restriction does not apply if: (1) the amount of 401(k) contributions required to be invested in employer stock does not exceed more than one percent of any employee's compensation; (2) the fair market value of all individual account plans maintained by the employer is no more than 10 percent of the fair market value of all retirement plans of the employer; or (3) as noted above, the plan is an ESOP.