Dear Mr. Berko:

I’ve been working at the same job for 20 years. I’m 57 and, like the other employees here, I am really unhappy with the 401(k) plan offered by the boss and managed by his poker and drinking buddy. It’s just a fixed annuity that pays 3.1 percent, and the company doesn’t contribute a penny. How can we improve our return? And can you help my daughter with her 403(b) plan, which is invested in a variable annuity? She’s a teacher and has invested $33,000; after 12 years, it’s only worth $38,000.

W.T., Oklahoma City

Dear W.T.:

Your 401(k) plan is the sorriest annuity I’ve seen since Ion Iliescu was president of Romania. And your daughter’s annuity has an embarrassingly poor choice of mutual funds, with annual fees high enough to pay her medical insurance premiums for the next three decades.

Because I don’t have a copy of the plan, I can’t advise you on your daughter’s 403(b), but I suspect that it is a product of a corrupt teachers union and an “I don’t care” school board.

I can give you some worthwhile advice to improve the performance of your 401(k). Your plan’s 3.1 percent average annual return certainly begs for improvement. Because the broker who manages your company’s plan is the boss’s buddy, I have two suggestions.

Your boss must know that the company 401(k) plan needs some zippity-doo-dah and sizzle. So ask your boss to add “windows” – better known as self-directed brokerage accounts – to the company 401(k).

Windows open to a personal 401(k) brokerage account at Charles Schwab, Moors & Cabot, Smith Barney, Fidelity, etc. and provide you access to more than 6,500 mutual funds, common stocks that trade on the New York, American and over-the-counter exchanges, as well as bonds, convertible issues, exchange-traded funds, options, unit trusts, etc. These firms can match you with a professional who can help you make investment choices.

If you elect this method, I strongly recommend – if you are not extremely market knowledgeable – that you keep it simple and purchase only no-load mutual funds. Bruce, Mairs & Power Growth, Stratton Small-Cap Value, Fidelity Balanced, Fidelity Value, Fidelity Low Price Stock and T. Rowe Price Capital Appreciation are a few funds for which I care. Keep them for at least 10 years and allow them to work for you.

Now if the boss refuses to provide you and other participants with an SDBA, then your remaining recourse might be to sue your employer. Your boss might not realize that he has a responsibility under ERISA (Employee Retirement Income Security Act) to comply with 404c as described in a Department of Labor bulletin (96.1) or 29 CFR 2550.404c-1-ERISA section 404c plans.

My daughter Hilary, who gave me this ERISA code, told me that you need an ERISA attorney to proceed. She believes that you have such an open-and-shut case that the ERISA attorney should pay you for the privilege of accepting the case. However, I suspect that if you show this column to the boss, he will, with alacrity, allow you and other participants to have an SDBA. Then it will be your responsibility to make sure that your 401(k) meets your objectives.

Though you couldn’t make much money with that “stinky” annuity, you couldn’t lose anything either except the 9 percent early exit fee. However, though you might be able to earn a 10 percent-plus annual return on these funds, it’s also possible that your losses in a bad market could exceed the potential return. But if you’re a long-term investor (at least 10 years), I believe you and your work buddies will be well ahead of the curve.

Please address your financial questions  to Malcolm Berko, P.O. Box  1416, Boca Raton, Fla. 33429 or  e-mail him at malber@adelphia.net.  © Copley News Service