(FORTUNE Magazine) – Marie Thibaut spent 15 years as an administrative assistant at Enron in Houston. During that time, she dutifully put 15% of her salary into a 401(k) plan, investing the entire amount in the company's rapidly climbing stock. Enron then matched that investment with yet more shares. By the winter of 2000, she had amassed close to $500,000 in stock and options, enough for the 61-year-old divorcee to begin contemplating early retirement. "My children told me I should diversify," Thibaut says. "But all the mutual funds were going down, and I just kept going up." She's not going up any longer. Today, Enron is bankrupt and Thibaut is out of work, a victim of one of the worst corporate collapses in history. Her 401(k) is worth just $22,000.

That sorry tale has been repeated thousands of times at Enron, Lucent, Nortel, and other companies whose stocks have cratered. But despite the punishing market and calls for diversification, workers continue to pour a huge portion of their retirement money into their employer's shares. Benefits consulting firm Hewitt Associates estimates that as of Oct. 31, almost 30% of the $71 billion in assets in some 1.5 million 401(k) plans were invested in the stock of the sponsoring company. At some places the proportion is even higher. Microsoft employees keep 46% of their 401(k) funds in company stock. At Enron, the figure was 62%. To make matters worse, many of these plans, like Enron's, restrict the sale of stock purchased with matching contributions until employees are close to retirement.

Now legislators and pension-reform advocates are saying enough is enough. Senators Barbara Boxer (D-California) and Jon Corzine (D-New Jersey) are sponsoring a bill that would force diversification by prohibiting any one stock from making up more than 20% of a 401(k), reducing the tax breaks for companies that match 401(k) contributions with stock, and limiting to 90 days the period a company can force employees to hold matching stock. Senator Jeff Bingaman (D-New Mexico) also wants to allow companies to provide employees with investment advice without penalty. (Current law makes a company liable for employees' investment decisions if it offers advice, and as a result, few do.)

The legislation won't necessarily pass without a fight. When Senator Boxer attempted to pass a similar bill in 1996, lobbyists--particularly those from option-reliant Silicon Valley--succeeded in watering her proposal down to the point where it simply barred companies from forcing employees to invest more than 10% of their own contributions in company stock. There's also the issue of companies matching 401(k) contributions with stock. Andrew Liazos, an attorney with McDermott Will & Emery, says if this practice is restricted, many companies may simply provide no match at all. Plus, he asks, isn't telling employees what to do with their retirement funds a bit paternalistic?

Pension-reform advocates say a little paternalism is just what is needed. "It's unrealistic to think that without a new law employees will limit the amount of company stock they buy," says Eli Gottesdiener, a lawyer who is suing Enron and its accountants on behalf of its 401(k) participants. Given what's happened at Enron, it'll be hard to counter that argument this time around.

--Jeremy Kahn