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Personal Finance editor HELEN HUNTLEY E-mail: Click here Archive

By HELEN HUNTLEY

© St. Petersburg Times, published March 25, 2001

Company isn't obligated to provide more fund choices

Q. My company's 401(k) plan allows employees to make investments with only one mutual fund family, which unfortunately has very poor returns and average or above-average expense ratios. Only one of the choices is an index fund. Is there a legal way to force the company to give employees choices with other fund families? We have appealed to management to expand our choices but been rebuffed. There is great unhappiness over this.

A. The short answer is that you cannot force your employer to provide fund choices more to your liking. In fact, your employer is not legally obligated to allow you to make investment decisions in your account. Most companies provide a variety of choices because it allows them to avoid legal liability if a fund you select does poorly.

But your company is not completely off the hook. An employer does have legal obligations to you and other plan participants.

"Federal law requires that a trustee and the other plan fiduciaries monitor the investment performance of the plan's investment choices and where necessary make appropriate changes," said employee benefits consultant Greg Matthews of Matthews Benefit Group in St. Petersburg.

He said adding new funds to a retirement savings plan is not as simple as it might seem. Even if a 401(k) record keeper offers mutual funds from more than one fund family, not every fund family will be available. Some low-expense funds charge extra fees if companies want to include them in a 401(k) program.

"You can't look at one factor alone and decide that a specific fund is a better choice than a current offering," he said.

Of course, you can keep lobbying and providing your employer with information about alternatives.

Q. Can you tell me about the IRS' 10-year statute of limitations? What is the procedure to qualify for this? I have made repeated calls to the IRS and cannot get an answer.

A. A statute of limitations is a deadline for taking action against someone. The tax code contains quite a few of these. For example, the IRS has three years to assess additional taxes on a taxpayer's return in most circumstances. If the return omitted income of more than 25 percent of the gross amount reported, the deadline is six years. But there is no deadline if the return was fraudulent or no return was filed.

The 10-year deadline you mention is for beginning collection proceedings on a tax that has been assessed. You do not have to do anything particular to qualify. But there are quite a few things you or the IRS might do that could stop the clock and give the IRS more time. For example, you might extend the limit by signing an extension or an installment agreement or by filing for bankruptcy. The IRS, of course, could begin some collection effort, such as filing a lien against your property or starting a court proceeding against you.

If you have a tax problem, it would be a good idea to get professional advice rather than just hoping that time will be on your side.

Q. My wife and I receive Social Security, and I have calculated that we pay an average of $2,200 a year in extra income taxes because we are married and file jointly. This is an unfair tax on our Social Security benefits. Our representative people in government do not even seem to know about this problem or are too interested in the money to care. What can I do?

A. Keep trying. Our representatives in Congress are the only people who have the power to change the tax law, so if you have an opinion, that's who needs to hear it. I have not checked your calculations, but you are correct that two people who have fairly similar incomes will pay substantially more in taxes as a married couple than they would if they were single.

Online money map

Although it is known mainly for its ratings on cars, J.D. Power also rates consumer service providers. New ratings on online brokerage firms are scheduled to go up on the company's Web site this week.

- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731, or to Huntley@sptimes.com by e-mail.

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