Enron is a financial tragedy - and more.

In the last 12 months, Enron stock fell from $83 a share to 12 cents a share, and roughly $60 billion of shareholder value simply disappeared into thin air.

All of this happened amid allegations that management hyped the stock while they were selling their own shares, knowing the company was a house of cards. And the auditors may have been complicit in the process of producing fraudulent earnings.

Much of that $60 billion in evaporated wealth belonged to Enron employees, who had as much as 90 percent of their 401(k) plan assets invested in Enron stock, locked in because of a procedural change. But others lost, as well. As the seventh-largest company in America at the start of last year, Enron stock was tucked into portfolios of many mutual funds and pension accounts.

As terrible as the personal financial tragedy is for employees and investors, the management of Enron did something even worse. They cast doubt on the workings of the United States capital markets, the basis of our free enterprise system. It's the system that raises capital to fund our future growth. The loss of faith in the fairness of that system is the lasting damage that Enron did.

When 401(k) plans came into being two decades ago, they created a flexible and portable self-directed retirement plan - far better than the traditional pension. But over the years some problems have developed, problems that can easily be solved.

The 401(k) Problem When 401(k) plans were created, 42 million American workers became pension managers without any education or reliable source of advice. And they did this in the midst of a once-in-a-lifetime bull market that encouraged them to think they could get rich quick in stocks. Now reality is setting in.

Solution: The Labor Department late last year issued rules allowing employers to bring in independent advisers to help employees make smarter investment decisions, and to understand concepts like diversification. The new Retirement Security Advice Act is making its way through Congress and is likely to be passed in the coming months.

Already, Web sites like www.FinancialEngines.com and mPower at www.MoneyCentral.com, Fidelity's Portfolio Planner and Morningstar ClearFuture offer 401(k) investment advice. Now employees need to use that advice.

The 401(k) "Matching-In-Stock" Problem The tax code encourages companies to make matching contributions in company stock. So if a company matches an employee's contribution dollar for dollar, the immediate result is that half of your retirement is concentrated in your company's stock. That violates every principle of smart investment.

Solution: Congress should take away the corporate tax deduction for matching in stock. Companies will protest, and cut back or eliminate the matching contribution, but eventually they'll restore the match in cash as they compete for employees.

The 401(k) "Stick With The Stock" Problem About half the companies that make matching contributions in stock also require that employees hold the stock until age 50 or 55, or until they leave the company. In effect, the employees are locked into an overwhelming position in company stock.

Solution: If your company has this restriction, the employees should direct a protest to the department that oversees the retirement plan process. And if they won't listen, write to the board of directors. The compensation committee of the board is responsible for the design of the retirement plan. They can easily lift that restriction.

The real problems with 401(k) plans can be easily solved: education, tax law changes, and sound management decisions to provide advice and diversification.