What’s the biggest problem with retirement savings?

How about the participants themselves?

It’s a mean-sounding card to lay down. But the fact of the matter is that in a world where defined contribution systems have become the prime mover in most American employees’ retirement plans, leaving all those decisions up to the participants themselves might not be the best idea.

After all, employees have got a lot on their plates. They spend every day wondering if they’re going to still have their jobs at the end of the week, or if this year’s political candidates are going to ruin their future working lives, or make them better.

They are not financial experts. They have short attention spans. They are worried about health care, as it’s a tangible, immediate cost. But trying to figure out what to save, or how to save it, or how to manage it, or if they should be saving at all – that’s an abstract concept.

Disclosing their fees only adds to the confusion, and the apathy. It’s a tough sell. And when you add the memories of those large and unpleasant losses to their 401(k) savings a couple of years back, it’s hard to get them motivated.

So here’s a radical – and yet completely old-school – notion on how to better manage a 401(k) at a plan sponsor level, for a smallish company. Pool the funds like a pension. Centralize the financial management, and get all of the employees involved in the same block of investments, and enlist some professional financial management that’s strictly middle-of-the-road in its outlook.

It’s a notion discussed by investment manager Kenneth G. Winans on Forbes’ Personal Finance blog, and it’s an interesting take on de-democratizing the 401(k) process, for the betterment of all involved. As heretical as that may sound.

Winans says the model is simple: Pension funds, at least the ones that have been run effectively and haven’t seen their assets bled to death in the last two years, are a no-brainer. Everyone involved is on the same track. The investment decisions get made collectively, and up until the last few years, the returns were strong enough to support the system for everyone.

What if you could take that centralization and find investments light on the radical stock market risk and heavy on the steady-as-she-goes angle, but use the collective weight of multiple participants to really make it worth its while? And, at the same time, centralize the fees to avoid nickel-and-diming every participant to death?

One manager could then, more effectively, use ETFs or direct investments in stocks or real estate investment trusts, versus the constant costs of mutal funds.

Sure, there are fiduciary concerns about centralized management, Winans admits, but setting performance objectives and managing the money in a prudent, middle-of-the road fashion – like a pension fund, pre-2009 – might make more for the participants involved.

But he argues that leaving the investment choices to the individual participants as a method of eschewing legal responsibility at the plan sponsor level doesn’t particularly hold water: Participants are suing now, even when they’ve made their own decisions. He also contends that ERISA allows for pooling, provided no more than 20 percent of the holdings get dropped into one single industry.

It’s a variation of the legislation recently proposed in California, which would create a state-managed retirement fund for 6 million or so workers there who don’t have access to company 401(k) plans. It’s also little like Senator Tom Harkin’s proposal.

Any takers? Hard to say. As Winans admits, the do-it-yourself appeal of the 401(k) still has a certain individualistic romance, but … when you look at the larger picture, it doesn’t appear to be working particularly well for most employees. A little education might also go a long way to change the picture, rather than leaving all the decisions on those overworked employees.