The Labor Department is about to propose new rules under which participants in certain types of pension plans would be given a substantial role in determining when and where their money is invested.

The rules, which are expected to go to the Office of Management and Budget today, cover savings plans such as 401(k) programs, as well as certain types of profit-sharing plans.

They would affect thousands of companies, millions of workers and hundreds of billions of dollars, according to the department.

"We are talking about big money here," said David Ball, assistant labor secretary and head of the Pension and Welfare Benefits Administration.

Under the rules, employers would be required to offer at least three investment alternatives -- four if employees can invest in the company's own stock -- and be able to move their money at least once every three months.

Examples of the types of investment alternatives a plan could offer would be a stock mutual fund, a money-market fund and a bond fund.

The department's aim, said Ball, is to provide plan participants with "maximum control" of their money, while allowing enough flexibility to accommodate new developments in the financial marketplace.

Bell said the new rules focus on broad principles and let the marketplace do the rest. Under the rules, employers must offer at least three different investments, "each of which must have materially different risk and return characteristics." The investments must offer diversity, and the employee must be able to switch at least once a quarter in at least three of the options.

If more than three options are offered, the once-a-quarter minimum applies only to the "basic three" alternatives, department officials said. Switching among the additional offerings must be allowed on a basis appropriate to the investment. In other words, the more volatile the investment, the more frequent switches must be allowed.

In addition, employer stock may be included, although only as a fourth alternative and only as long as it is publicly traded with sufficient frequency and volume to assure liquidity. The employee must also be free to sell the stock and must be allowed any voting and other rights that would ordinarily go with the shares.

The rules apply only to certain of what is called defined contribution plans, in which the employee and/or the employer contribute money to an investment fund and the employee gets whatever the fund has grown to when he or she retires.

Not affected are the traditional defined benefit plans in which benefits are provided under a formula, usually related to age and length of service, and the employer takes all the investment risk.

Employer and insurance groups said that while they had not seen the details of the proposed rules, they regarded them as a great improvement over ones suggested in 1987.

"Subject to seeing the exact language, we feel they have come a long way toward resolving the problem we had," said Stephen Kraus of the Washington-based American Council of Life Insurance.

The proposal is the department's second attempt to write regulations implementing the savings plan provision of the 1974 Employee Retirement Income Security Act (ERISA). The rules drafted in 1987 were rejected by the OMB after a lobbying campaign by major employers and insurance companies.

Particularly, employers feared that the rules would have barred them from offering their own stock as an investment option, and insurers feared that their guaranteed investment contracts -- a popular investment plan option -- would have been destabilized by investment-conscious employees who shift between plans.

"It appears that they are taking an approach that much more resembles the reality of how these plans are structured and have been for many years," said James A. Klein of the Association of Private Pension and Welfare Plans of Washington.

Ball said that if the OMB does not object to the rules -- and he does not expect it will -- they will go into effect by the middle of next year.