(MONEY Magazine) – Two developments on the 401(k) front had me pretty shaken up recently. First came news that thousands of workers at Enron--the now bankrupt Houston energy company--lost much of their 401(k) savings after loading up on Enron stock, which plummeted from $89 a share in August 2000 to 26[cents] in November. But it was the second item that really rattled me: the announcement that Congress was coming to our rescue with new 401(k) legislation.

I don't mind our legislators assuming the role of 401(k) watchdog. I just think they're going about it the wrong way. The heart of the plan involves limiting the amount of company stock we can hold in our 401(k)s. A bill sponsored by Sens. Barbara Boxer and Jon Corzine would set the maximum at 20% of assets, while legislation proposed by Peter Deutsch and Gene Green in the House would limit employer-contributed company stock to 10%.

At first glance, this may seem a prudent solution. After all, most financial experts, including MONEY, have long warned that concentrating your holdings in company shares can be a dangerously risky gambit. But at MONEY we also recognize that no single percentage is right for everyone. If you already have much of your net worth tied up in employee stock options, even 10% in company stock may be too much. (And rest assured, some people will wrongly interpret a limit as a safety threshold.) Conversely, a sophisticated investor with a large, otherwise diversified portfolio might reasonably choose to assume the risk of holding more than 20% of 401(k) assets in company stock for the chance of higher returns.

But one element of Congress' plan is worth pursuing. Both bills would limit how long employers can prevent you from selling company stock the employer has contributed. The House bill would allow you to sell such stock after three years, while the Senate version would let you sell company stock after 90 days, provided you're fully vested. This approach isn't perfect, but at least it gives us more options rather than fewer.

If anyone in Congress is listening, I have one final suggestion. Why not also add a provision requiring employers to provide material outlining the risks of concentrating one's retirement portfolio in any single stock, company or otherwise? After all, an informed 401(k) participant will make better choices than one who's simply told what to do.

--WALTER UPDEGRAVE