If I could make a series of 401(k) action figures, one would be William "Tex" Gross. Someday, millions of younger workers may have better 401(k) plans because he saw a better idea and acted on it.

Sound improbable? Then listen to the story.

Back in 1999 about 80 percent of eligible employees in America were participating in 401(k) plans, deferring 8.6 percent of their salaries. Today, participation has dropped to 70 percent and deferrals are down to 6.9 percent.

We all know the reasons.

Here's the common list: The market wipeout of 2000-2002; criminal violations of trust like Enron; cutbacks in company contributions by corporate managements with separate, superior, and fully funded retirement plans; and ever widening recognition that the mutual fund supermarket approach is a bonanza for the financial services firms--- but a path to misery for workers.

The better idea started with Brooks Hamilton, the ERISA attorney who regularly points out that most workers will "retire to despair"--- largely due to the structural inadequacies of 401(k) plans. Hamilton urged Mr. Gross to install a revolutionary plan, one with automatic enrollment, a large company contribution, and a single managed fund. Basically, he suggested making a 401(k) defined contribution plan look as much like a defined benefit pension plan as possible.

Mr. Gross is president of SAMCO Capital Markets, a Dallas firm that provides growth capital to the banking industry. SAMCO is a subsidiary of Penson Financial Services, also located in Dallas. During a recent interview at his office, Mr. Gross said SAMCO had wanted to commit to a new vision of how to run a 401(k) plan in late 2001. He allowed that participation in the existing plan was low, only 40 percent.

George A. Kirchway, a SAMCO vice president, said the company wanted a plan that was oriented toward the lower paid employees, not the bigwigs. "One of the most compelling ideas we saw was the difference between two people with identical company histories but very different results in their 401(k) plans. We wanted people to have something to retire on."

The problem was how to get there.

The existing plan offered eleven mutual funds from a major mutual fund company. Employees had been sold on supermarket choice. They were also comfortable with the fund company brand. They weren't likely to volunteer to have all their money moved to a new portfolio, particularly one managed by a no-brand stranger.

Early rumblings made it clear: A unilateral change would be DOA.

Enter Tex Gross as action figure. A fan of free markets, Mr. Gross decided to retain all the existing funds, but add a managed portfolio option. Workers would be defaulted into the managed portfolio unless they made a deliberate decision to invest their contributions elsewhere. Basically, the company would make a pension-like investment unless the employee wanted to do otherwise. The two approaches would compete for the same money.

That was January, 2002.

(The money, you should know, was to be managed by Nolan Jones at Optima Management, another Dallas firm. Mr. Jones, who has been mentioned in this column before, created a series of model portfolios, including the default portfolio. A geek extraordinaire, Mr. Jones was going head-to-head against some of the brightest and best paid mutual fund managers in the world.)

Last December, only four years later, employee participation was at 76 percent, well over the national average. The participation rate had nearly doubled. Equally important, the diversified default portfolio blew away the mutual fund choices offered by the big and respected mutual fund company.

Blew away?

Put it this way, by Dec. 31, 2005, only 6 percent of the assets in the plan remained in the eleven mutual funds. The other 94 percent was in the default portfolio. The eleven leading, well-known mutual funds were shown the door.

Mr. Gross smiles while telling this story. He knew it was a matter of choice. He knew money goes where it is treated best.

Now all of us know that there is a better way to run 401(k) plans. There is a way that puts experts in charge of money instead of novices. There is a way that cuts record-keeping and administrative costs. There is a way that can bring investment management costs down from the retail pricing of the mutual fund industry to the wholesale pricing of pension fund management.

Most important, there is a way that will make employee accounts bigger when they retire.

What do we need to see this idea spread?

Simple: We need corporate managements that go beyond the comfort of conformity and brand selection.

On the web: National Center for Policy Analysis, "Reinventing Retirement Income in America" by Brooks Hamilton and Scott Burns

Participation in 401(k) Plans Declines in 2005 According to Spectrem Group

The "DB-ing" of DC Plans

Scott Burns, Sunday, March 5, 2006: Playing the 401(k) Lottery (with online calculator)

Don Trone, the first action figure of 401(k) plans