The mutual funds that are available for my retirement plan are less than mediocre. As a current or former employee, do I have any legal rights in influencing which funds are selected? -- Stephen Kabak
You can try wearing a sandwich board to work every day and picketing the human resources department at lunch. Remember, it's not your call; it's the company's.
"It is purely the employer's right to choose the investments," says Debra Levine, assistant vice president of retirement plans at
The laws that govern 401(k) plans fall under the
Employee Retirement Income Security Act
, or ERISA. And employers are indeed required to follow specific standards in administering a plan, selecting investment providers and educating employees.
Your company, the plan sponsor, has what's called a "fiduciary duty to act prudently." That means the company is required to show responsibility, care and good judgment in managing and monitoring the plan's assets. But that doesn't mean the company has to give you 20 investment options, all of which are the best-performing funds of their kind.
In fact, a plan sponsor only has to have "a minimum of three core funds in order to satisfy
Department of Labor
regulations that outline how investment risk can be passed on to employees," says Bill Baker, senior regulatory support officer at
American Express Retirement Services
in Minneapolis. By giving the employee at least three diverse investment options, the employer won't be liable for investment losses suffered by the employee.
Three or four years ago, you might only see about three investment options in a company plan. "Now eight to 10 choices are fairly common," Levine says.
But it's hard to make a compelling case that the company is not acting responsibly based solely on the number or performance of funds in a plan. "Absent something egregious, it's very difficult," says Rich Koski, a principal at
in New York.
Something egregious would be "obvious shenanigans or self-dealing," Koski says. You might have a case, for example, if a fund provider has a poor regulatory record. Perhaps the performance of a fund has been abysmal during the past 10 years or its fees are grotesquely high. Then you might be able to argue that such a fund should not be in your plan.
"There are host of doomsday scenarios you could come up with," Baker says. But the gist is that no fund is expected to have top-quartile performance every quarter. And you just can't insist that the funds of a specific firm be available in the plan. If you want to invest in an Internet fund, you might just have to do it with your money outside of your retirement plan.
If you are no longer an employee of the company, you should have the right to roll over the money into an IRA or perhaps a new employer's plan.
But as a current employee you're in a tighter spot. Your only real option: Complain.
If you feel like you do have a solid complaint, you should start by talking with your company's human-resources department or the benefits administrator. "You can do this in a nonthreatening and nonadversarial way," Baker says.
You may also want to write a letter to the head of human resources, specifically outlining your grievance.
Koski at Buck Consultants suggests another avenue. "If you don't get any response from the human-resources department at your company, you can typically go to senior management."
Try writing a letter to the chief executive or the chief financial officer of your employer. An executive might pass down a letter from a plan participant to the head of human resources. And frankly, a note from the president's office carries a lot more weight than one coming directly from a lone employee. "They don't get ignored usually," Koski adds.
If you think you have a compelling case that your company's plan is in violation of pension regulations, you can contact the Department of Labor's
Pension and Welfare Benefits Administration
, which oversees retirement plans. If you're merely dissatisfied with the investment options in your 401(k), the PWBA can't help you.
Otherwise, this division's office of technical assistance and inquiries can be reached through one of 15 field offices around the country. You can locate one of these offices on the Labor Department's Web site at
The unit has service representatives who can field questions and tell you what your recourse may be. You can also send a letter to the following address:
U.S. Department of Labor
Pension and Welfare Benefits Administration
Office of Technical Assistance and Inquiries
200 Constitution Ave., NW
Washington, D.C. 20210
You can expect a reply within 30 days of the receipt of the letter, says a Department of Labor spokeswoman.
But don't get your hopes up. "The time period can be long, and usually the Department of Labor won't investigate on one inferential complaint from an employee," Koski says.
You could always resort to wearing a "Down With the Man" T-shirt to work.
Words From Bogle
Jack Bogle has an op-ed piece in
The New York Times
today, which doesn't mention the recent fracas at
He might not have a board seat at Vanguard for much longer. But he'll certainly have a bully pulpit for a long time to come.
Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.