By Dolores Kong
The Boston Globe

When Marilou Lundin and John Cashell learned that the
best- performing mutual fund in their retirement plan
would be eliminated, they took action.

"I had earned 79 percent in Fidelity Growth Company
last year, and you can't take it away" - that was
Lundin's reaction in February when she heard the news,
she said.

Lundin, 57, is executive secretary for Woburn's
retirement board. Cashell, 42, Woburn's planning
director, had a similar response.
"I was pretty upset at that point," he said. "I've
been involved with Fidelity Growth Company for the
last six or seven years. It's done really well."

It's the kind of worry anyone with a retirement plan
can face, whether it's a Section 457 plan for
government employees like Lundin and Cashell, a
private-sector 401(k) plan, or a 403(b) plan, which is
available to certain public school systems and
nonprofit organizations.

Basically, employers can set up whatever kind of plan
they want - and make whatever changes they see fit -
according to what they consider to be the best
interests of the participants. But sometimes, unhappy
participants can persuade the employer or the plan's
sponsor to reconsider.

That's what happened recently with Massachusetts'
Section 457 "deferred compensation plan," which is
available to state, county, and municipal employees.

In Woburn and elsewhere, there was an outcry about
losing Fidelity Growth Company as part of a major
review - the first one in years - that led state
officials to decide the plan's offerings should be

But state Treasurer Shannon O'Brien, who is ultimately
responsible for the plan, decided to retain the
top-performing fund after people like Lundin barraged
her office with calls. Other changes, also designed to
improve the plan, take effect later this year.

"The plan design is solely at the direction of the
employer. That's the law," said David Wray, president
of the Profit Sharing/ 401(k) Council of America, a
Chicago-based association of companies that provide
such plans.

"But on the other hand," he said, "the employers that
have 401(k) plans and 457 plans do so to attract,
retain, and motivate a high- quality work force in
this very tight labor marketplace."

The rights of participants in retirement plans have
become an important and sometimes contentious issue as
more and more employers move away from traditional
pensions. Replacing them are plans like 401(k)s, in
which employees' own contributions and investment
decisions determine how much they will reap in

Traditional pensions ("defined-benefit" plans)
typically pay a retirement benefit based on a
percentage of salary and on length of service.
Employees can count on a certain dollar amount in

But with 401(k) and similar plans
("defined-contribution" plans), retirement benefits
depend on how much the employee has contributed and on
how much the investment has returned. There is no set
dollar amount an employee can count on.

So when a big change is made, employees who are trying
to maximize their investment returns are bound to

Companies have been telling employees "it's your
responsibility, planning for retirement," said Ted
Benna, president of the 401(k) Association, a
Pennsylvania-based advocacy group. Yet employers make
changes as they see fit, sometimes to the dismay of

"Isn't this contradictory?" asked Benna, a benefits
consultant who created the first 401(k) plan in the
late 1970s after a novel - and successful -
interpretation of the Internal Revenue Code's section

In 1998, more than 33 million people actively
participated in 401(k)s, the most popular form of
defined-contribution plan, with total assets of $1.4
trillion, according to the latest estimate from the US
Department of Labor.

The rights of participants in 401(k) and other
defined- contribution plans are limited by ERISA, the
federal Employee Retirement Income Security Act.
Basically, participants are entitled to:

- Examine the plan's documents and Labor Department

- Receive a summary of the plan's annual financial

- At least once a year receive a statement of accrued

- Find out which employers or employee organizations
are sponsoring a plan.

Some 403(b) and 457 plans are exempt from ERISA,
though, and don't have to meet even these minimal

Retirement plans may also be subject to federal
nondiscrimination rules, to prevent higher-paid
employees from benefiting disproportionately, and to
various contribution limits and distribution rules.

For example, if you switch jobs and have a vested
401(k) balance of $5,000 or more and you're under age
65, you can leave your money with your former employer
or roll it over at your convenience into an IRA or
your new employer's 401(k).

If you have less than a $5,000 balance, however, and
you don't tell your former employer within 30 days
what you want done with the money, the employer can
issue you a check, minus a required 20 percent tax

You may also be subject to a 10 percent early
withdrawal penalty and additional taxes if you don't
deposit that check and the missing 20 percent into an
IRA or another 401(k) in a timely manner.

Aside from such legal requirements, the sponsors of
retirement plans choose the investment options, decide
how much of your invesment the company will match, if
any, and what loan provisions there will be, if any.

Some of the most common 401(k) complaints are about
loan provisions and limited investment choices, said
Brenda Watson Newmann, managing editor of 401Kafe, an
online forum for 401(k) participants.

The forum is part of mPower, a San Francisco company
that provides 401(k) advice to participants, under
contract with employers. Benna, of the 401(k)
association, is on mPower's board and responds to e-
mail questions.

A top e-mail question www.401Kafe.com gets: "Can't I
take out $10,000 to buy a first home?" Not
necessarily, Newmann said. "A loan is dependent on the
plan. Most plans allow it, but not all."

Another common complaint: "I think my plan choices are

Employers, though, sometimes reason that having too
many investment options is not in the best interest of
all participants - particularly those who aren't
financially savvy.

"This is the fine line that plan sponsors walk,
really," Newmann said - providing enough alternatives
for the most astute investor without providing so many
that "someone could make a mess of their 401(k)."

Employees can still make their concerns heard, though.

"Employers put these [plans] in to benefit employees,
not themselves. If employees are not happy, the
employer will probably heed the message," said Bob
Glovsky, a certified financial planner and president
of Mintz Levin Financial Advisors in Boston.
"If employees feel choices are limited, they should
let their employer know - in a nice way."

At some companies, a committee oversees the 401(k);
others put a human resources official in charge. Some
plans' terms are negotiated, as part of union

Glovsky recommends that employees seek at least these
choices: a large-cap fund, a small-cap fund, an
international fund, and a conservative fund.

Lately, some employers have been providing a core
group of mutual funds for everybody and a higher-fee
"self-managed account" or "window" for the savviest
investors, those who want access to unlimited mutual
funds and even stocks, Wray, of the Profit Sharing/
401(k) Council of America, said.

"This discussion is going on around the country," he
said. "It is not unusual for a vocal minority - one or
two people - to be dissatisfied with a limited number
of broad-based options."

Michael Young, 30, would be happy to have even a
limited number of broad options. But so far, he and
others who work at Original Bradford Soap Works Inc.,
in Warwick, R.I., haven't gotten too far with their

Union members there have two choices: a short-term
fixed income fund or the equivalent of a bank account.
Furthermore, they can contribute only $5 to $50 a
week, regardless of how much they earn - far below the
legal cap of $10,500 for this year. The company
contributes between 20 cents and 35 cents on the
dollar, based on length of service. The plan has no
loan provisions.

Young, assistant chief steward for the Teamsters local
at the soap plant, plans to tackle the 401(k) issue in
the next round of contract talks. He told his story
online to 401Kafe. "Everybody in the unit's very upset
over it," Young said in an interview. "We didn't get
very far last negotiation."

During the controversy over the Massachusetts Section
457 plan, though, the vocal minority wasn't concerned
so much about having more options as with keeping one:
the Fidelity Growth Company fund.

Hundreds of phone calls flooded the offices of the
state treasurer, the Retired State, County and
Municipal Employees Association, and local unions.

The state treasurer's decision to keep Fidelity Growth
Company has made many people happy, but some are still

Richard Tomczyk, 47, who works for the Executive
Office of Environmental Affairs, called the
treasurer's office about some other funds he holds
that will be dropped from the 457 plan.

"I did suggest that they consider keeping the Vanguard
funds," he said. "Maybe they're not as popular as
Fidelity Growth. There wasn't the same reaction to

"My first response was, I had no control. Do we have
any rights?" said Tomczyk, who also holds Fidelity
Growth Company.

He understands that changes in the plan are expected
to bring benefits, such as lower fees and more diverse
offerings, eventually including access to thousands of
mutual funds.

But Tomczyk said he has mixed feelings, particularly
about unlimited access: "That's good and bad."

"I guess I'm just anxious," he said. "It's more of not
knowing the facts."