Some investors in 401(k) retirement funds who are moving to grab their money are finding they can’t.

Even with recent gains in stocks such as Mondays, the months of
market turmoil have delivered a blow to some 401(k) participants:
freezing their investments in certain plans. In some cases, individual
investors can’t withdraw money from certain retirement-plan options. In
other cases, employers are having trouble getting rid of risky
investments in 401(k) plans.

When Ed Dursky was laid off from his job at a manufacturing company
in March, he couldn’t withdraw $40,000 from his 401(k) retirement
account invested in the Principal U.S. Property Separate Account.

That fund, which invests directly in office buildings and other
properties, had stopped allowing most investors to make withdrawals
last fall as many of its holdings became hard to sell.

Now Mr. Dursky, of Ottumwa, Iowa, is looking for work and losing patience. All he wants, he said, is his money.

"I hate to be whiny, but it is my money," Mr. Dursky said.

The withdrawal restrictions are limiting investment options for plan
participants and employers at a key time in the markets. The timing is
inconvenient for the number of workers like Mr. Dursky who are laid off
and find their savings inaccessible.

Though 401(k) plans revolutionized the retirement-savings landscape
by putting investment decisions in the hands of individuals, the
restrictions show that plan participants aren’t always in the drivers
seat.

Individual investors mightn’t even be aware of some
behind-the-scenes maneuvers causing liquidity problems in their
retirement plans. Many funds offered in 401(k) plans lend their
portfolio holdings to other investors, receiving in exchange collateral
that they invest in normally safe, liquid holdings.

The aim is often to generate a small but relatively reliable return
that can help offset fund expenses. But in recent months, many of the
collateral investments have gone haywire, prompting money managers to
restrict retirement planswithdrawals from the lending funds.

Some stable-value funds also are blocking the exits. These funds,
available only in tax-deferred savings plans such as 401(k)s, typically
invest in bonds and use bank or insurance-company contracts to help
smooth returns. But in cases of employer bankruptcy and other events
that can cause withdrawals, these funds can lock up investor money for
months at a time.

Investors in the Principal U.S. Property Separate Account said they
understood the risk of losses, but didn’t think their money could be
locked up for months or years. Most participants in the 15,000 plans
holding the fund haven’t been able to make any withdrawals or transfers
since late September.

"To sell property at inappropriately low prices in order to generate
cash for a few would hurt the majority of investors and violate our
fiduciary obligations," said Terri Hale, spokeswoman for Principal Financial Group
Inc., the parent of the funds manager. The fund, which had $4.3
billion in net assets at the end of April, still is making
distributions for death, disability, hardship and retirement at normal
retirement age.

As of April 28, redemption requests that had yet to be honored
totaled nearly $1.1 billion, or roughly 26% of the funds net assets.
Principal doesn’t anticipate that it will make any distributions to
investors who have requested redemptions until late 2009 or beyond, Ms.
Hale said. Meanwhile, the fund continues to fall, declining 25% in the
12 months ending April 30.

Some investors have lost hope of recovering their money. Judith
Sterner, a 69-year-old part-time nurse, had more than $12,000 in the
fund when she tried to transfer that balance to a money market last
fall. But her transfer was denied, and her stake has since declined to
less than $10,000.

"This $12,000 represents a year of my retirement money that I don’t have," said Ms. Sterner, of Morton Grove, Ill.

Principal still allows new investors into the fund. It categorizes
the U.S. Property account as a fixed-income investment, alongside much
stodgier funds holding high-quality bonds. New investors are warned of
potential withdrawal delays, Ms. Hale said. As for the fixed-income
categorization, she said, "a substantial portion of the account return
is based on income streams from rents, and its returns have been
comparable to fixed-income funds."

While the problems selling real-estate investments are relatively
straightforward, withdrawal restrictions related to securities lending
stem from far more obscure practices.

Funds often lend out portfolio holdings, through a lending agent, to
other investors. These borrowers give the lender collateral, often
amounting to about 102% of the value of the securities borrowed. Some
of the collateral pools in which funds invest this collateral held
Lehman Brothers Holdings Inc. debt and other investments that plummeted
in value or became hard to trade in the credit crunch.

Though agents who coordinate fundslending programs share in
profits from securities lending, the risk of such collateral-pool
losses falls entirely on the funds that have lent the securities and,
ultimately, retirement plans and other investors holding those funds.

The problems have limited retirement plansability to get out of
securities-lending programs, though participantswithdrawals generally
haven’t been affected.

Retirement plans offered to employees of energy company BP PLC last fall tried to withdraw entirely from four Northern Trust
Corp. index funds engaged in securities lending. Certain holdings in
Northerns collateral pools had defaulted, been marked down, or become
so illiquid that they could only be sold at low values, according to a
BP complaint filed in a lawsuit against Northern Trust.

The BP plans halted new participant investments in the funds and
asked to withdraw their cash so it could be reinvested in funds that
don’t lend out securities.

But under restrictions imposed by Northern Trust in September,
investors wishing to withdraw entirely from securities-lending
activities would have to take their share of both liquid assets and
illiquid collateral-pool holdings, according to a Northern Trust court
filing. BP rejected that option, and the companies still are trying to
resolve the matter in court.

Northern Trusts collateral pools are "conservatively managed" and focus on liquidity over yield, the company said.

State Street
Corp. in March notified investors of new withdrawal restrictions in its
securities-lending funds. Until at least the end of the year, plans can
make monthly withdrawals of only 2% to 4% of their account balance, the
notice said.

Plans wishing to withdraw entirely from lending funds will have to take a slice of beaten-down collateral-pool holdings.

"Given the current state of the fixed-income market, we felt it was
prudent to put some well-defined withdrawal parameters in place," said
State Street spokeswoman Arlene Roberts.