Pension-plan participants and managers with fiduciary responsibility for pension plans span a surprising range of sophistication and interest. At one end, a manager responsible for $6 million did not know the difference between a load and a no-load mutual fund. At the other, a committee used an elaborate algorithm to select several managers and directed them to sell part of the equity portfolio when market value exceeded book value by a specified percentage. A third manager had the whole issue figured out: "Look-as long as there are no complaints, everything is fine!"

As it turned out, the $6 million manager had a better 401(k) result than the committee-perhaps because she knew what she didn't know.

So what does a pension-fund manager or participant have to know? Not a great deal, if he or she is doing it right. First, the manager has to ensure good administrative support. Second, the manager must be informed quarterly of whether the plan is beating the appropriate averages (the S&P 500 for stocks and the Shearson Lehman Bond Index, for example). Third, the participant has to use, and the manager has to encourage, the proper implementation of plan alternatives to accumulate wealth for retirement.

The manager who relied on complaints did have a point-a third-party administrator (TPA) that produces few employee complaints is at least meeting a minimal standard. However, a good TPA is also proactive in suggesting ways to improve operations. Is the TPA implementing tax-law changes promptly-or waiting for the IRS to tell you about them after the fact? Are the TPA's reports timely and accurate? A good TPA costs the same as a weak one, or only a little more. If you're unhappy with your TPA's performance, you should be able to get the names of some good ones from your financial advisor.

When you hire a securities firm or a bank to manage pension dollars, part of what you pay for is service. That service should include a quarterly briefing that informs you about the performance of your accounts compared to appropriate indexes. This formal meeting helps you meet your fiduciary responsibilities.

If you didn't beat the averages during one quarter, that is not alarming in itself. However, your financial advisor should tell you whether the fund will probably bounce back or whether there may be cause for alarm-because the star manager has just departed, for example. (If a new manager is installed, you may not want your employees paying for his or her learning curve.)

Let's assume that the firm has been very thorough in identifying the right TPA, has identified a capable, reasonably priced money manager through its financial advisor, and has set up a plan that offers a well-balanced choice of stocks, bonds, and money-market funds.

The challenge still facing the firm is convincing the employees to use the process correctly. Employees often try to time the market, jumping in and out of investments-and they often choose investments that don't suit their situation. The answer to this problem is education. A good financial advisor will meet regularly with your employees to help them understand that it makes sense to invest aggressively in their early years, turning moderately conservative in their middle years and more conservative as they approach retirement. A 35-year-old plan participant who considered himself a "very conservative" investor went on to tell me that he invested only in bonds. Unfortunately, he was probably doing the wrong thing for his situation. Even "very conservative" doesn't mean "no stocks." One needs to have some protection against inflation-which bonds don't provide.

A conscientious, well-informed financial advisor will help your firm select the TPA and the money manager(s), assess performance with you each quarter, and meet with your employees periodically to help them understand how to use the plan. That kind of financial advisor can make your life easier.

Emily S Hazlett is Vice-President:Investments at ENB Insurance Agency, Inc. a wholly owned subsidiary of Evans National Bank.