For millions of employees who are putting aside money in their companies’ 401(k) plans, the recent management upheaval at the country’s biggest bond mutual fund has created a quandary.  

In many of those plans, Pimco Total Return Fund is the principal--and in some cases the only--option for bond investing. While other investors, such as those using standard brokerage accounts, could simply shift their money to a different yet comparable fund, these employees can’t.  

Many plan sponsors began reassessing Pimco Total Return after the departure of Bill Gross, Pacific Investment Management Co.’s founder and manager of the fund. In addition, for some, the fund’s underperformance and heavy short-term outflows may have undermined faith in the fund. …  

…Conversations about whether to replace the now $201.6 billion Pimco Total Return Fund entirely, add another bond-fund option or put the fund on watch are now taking place at defined-contribution plans, defined-benefit plans, foundations, endowments and other plans all over the world, says Timothy Barron, chief investment officer of Segal Rogerscasey, a consultant on defined-contribution plans.  

But the full effect of those discussions may not be felt until next year. …  

…Already some defined-contribution plans that offered the fund as their sole core bond option have added another choice for participants, and many others are now re-evaluating whether to dump the fund.  

An early mover is Ford Motor Co., which said last month that it plans to drop the fund from its 401(k) plan as of Nov. 14. Instead, participants’ balances in the fund will be invested in the Bond Index Fund, a collective investment fund managed by BlackRock Institutional Trust Co., Ford said.  

“This decision was made after the recent resignation of Bill Gross,” the auto maker said in a statement.  

John Schroeder, an engineering product designer at Ford in Macomb Township, Mich., says he hasn’t invested in the fund in the last year, but is disappointed that it’s being removed and that no replacement is being added.

David Kudla, Mr. Schroeder’s financial adviser, says the Ford plan offers no options in the same category as the Pimco fund.  

“I would rather have Pimco Total Return remain in the plan than taken out just because Bill Gross is leaving,” says Mr. Kudla, chief executive of Mainstay Capital Management in Grand Blanc, Mich., who has hundreds of clients who work at Ford. “At the end of the day, they’re just reducing the number of options in the plan.” ... 

…John Miller, head of retirement at Pimco, said the fund “remains a strong core bond option for participants because of its broad diversification benefits and long-term performance, particularly during periods of market stress.” …

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