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Mark,

Great post explaining 403(b) plans! And I encourage anyone who is not happy with the options offered in their retirement plan to let their employer know, and try to drum up some support among fellow employees. I was able to successfully lobby our school's board to add a "socially responsible" fund option to our Profit Sharing plan by presenting a petition signed by several employees to the board along with some research on the fund.

To clarify one point:

Some employers have also approved of 403(b)7 (mutual fund) plans. Often these can have high management fees, but sometiems they can also be good deals. I have heard Vanguard (no surprise) and Fidelity mentioned favorably.

It is not up to the employer to "approve" of a 403(b)7 account. This is something you can set up as an individual without contacting your employer. The employer need never know about it at all. You can set one up with any mutual fund family that offers them.

What is up to the employer is whether or not they will contribute your 403(b) payroll deductions directly to your 403(b)7 account. My understanding is that some will and some won't. But if they won't, as in my case, all is not necessarily lost.

If your payroll deductions cannot go directly to your 403(b)7 account, you can arrange (actually, your 403(b)7 provider will be happy to arrange this for you) for periodic transfers from your 403(b) account to your 403(b)7 account.

The exception to this rule is if your 403(b) account contains employer-contributed (i.e. "matching") funds. In this case, it is possible for the plan to be structured so that funds cannot be transferred away from the 403(b) provider. The employer does have the option of allowing transfers; however most plans do not allow them because the providers, not the employers, want them that way.

Before transferring funds to a 403(b)7, you should also check into possible surrender charges involved in the transfer. Some plans have them, some don't. And sometimes it may vary even among investment options in the same plan, i.e. there may be surrender charges associated with all options except a money market.

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