Expert: Allen - 12/20/2006

Question
Hi,

My wife is a school teacher in Connecticut.  She participates in the teacher's equivalent to a 401K which I believe is a 401b.  This plan is administered thru Metropolitan Life. The town she works for, only allows contributions based on a dollar amount and not a percentage.  I am in the private sector and my company also use Metropolitan Life and we can change the contribution amounts, reallocate funds online.  My wife plan can not.  We would like to contribute a set percentage of her salary and as the salary grows so do the contributions.  The method established by the Town requires us to personally meet with the Broker and sign a form every time we want to change her contributions.  This is time consuming and therefore limits our ability to maximize her contributions.  We believe that the Town's method is unfair and therefore the teachers do not have the same privileges provided to other Metropolitan Life members.  Question:  Is the town allowed to enforce this rule?  What government agency governs these plans?  How can we force the town to accept percentage contributions rather than dollar amounts?  Thanks

Answer
The plan your wife participates in is known as a 403(b) plan. Unfortunately, with either a 401(k) or 403(b) plan, the company or school district setting up the plan can establish many of the rules. This includes the manner each employee determines the contribution.

The gov't agency that overseas these plans is the U.S. Dept. of Labor. But, they can't force the change. So going to them will not be productive.

What you may want to do is either:
1. Speak to the broker and ask him if he can get the town to change.
2. Speak to the members of the School Board for the town and ask them to make the change in the plan.

Good luck.