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Dear Dagen: Can I Move Money Out of My 403(b) Plan?

There's no simple answer. It all depends on the plan and the paperwork.

I would like to contribute the full amount allowed to my 403(b) plan. The only funds offered where I work charge annual fees between 1.5% and 3.5%. I invest after-tax dollars in similar funds charging 0.2% to 0.5%. Can I override my company's choices and choose my own funds? --Morris Sandvig

Morris,

Trying to understand the rules and regulations surrounding retirement plans is like reading

Ulysses

in a dark closet. It doesn't take long to discover it's no simple task.

As you probably know, a 403(b) is a type of retirement plan sponsored by public school systems, universities and charitable organizations. You will often hear that 401(k) plans are the corporate equivalent of 403(b)s. Yes, they are both retirement plans, but your 403(b) might be dramatically different from your neighbor's 401(k). And the differences can be both good and bad.

Many 403(b) plan sponsors, such as schools, are exempt from the federal laws that govern 401(k) plans. These laws fall under the Employee Retirement Income Security Act, or ERISA, which requires employers to follow specific standards in administering a plan, selecting investment providers and educating employees.

But some 403(b) plans

do

come under ERISA. There's one easy way to tell: If your employer is making matching contributions to the plan then it falls under ERISA. Not surprisingly, ERISA 403(b) plans look and act more like 401(k) plans. If so, you may not be able to invest outside of the company-provided options.

But many 403(b) arrangements involve salary deferral and don't have employer contributions, says Debra Levine, assistant vice president in retirement plans at

Pioneer Investments

in Boston. In this situation, an employer is merely acting as the conduit. It takes the money out of your paycheck, sends it to the investment provider and doesn't have much control over the arrangement. And the plan does not have to follow the same standards as a 401(k).

In this type of 403(b) plan, you would have a list of investment options, like almost any retirement plan. Many of these traditional 403(b) programs have a lot more investment choices than 401(k) plans. But that doesn't mean they are more desirable. In some cases an employee might have scores of investment options, all among insurance products loaded with fees.

If you don't like what you are getting, you may be able to move your money out of one of these traditional 403(b) plans and into investments of your choosing. Theoretically, you can move an existing account balance to another 403(b)-qualified investment, like a mutual fund, says Peter Gold, a principal and benefit consultant in the Stamford, Conn., office of

TheStreet Recommends

Buck Consultants

.

But don't get too excited. There are plenty of barriers that might prevent you from doing so.

For one, you can't simply say that you want your contributions to go into a new investment vehicle if it is not in the plan's stated options. "The money initially has to go in where the employer wants to send it. It just can't go anywhere," says Gold. Once the money is in your 403(b) plan, you might be able to move it into an account of your choice, as long as it's a qualified 403(b) investment. If that's the case, there are no legal restrictions limiting the frequency of these transfers, says Levine.

But your plan or the underlying investments might have rules that could prohibit you from moving this money. "You have to look at the documentation that was used to set up the funds to see what control you have over the money," says Gold. Also, look for any surrender or back-end charges that may make it costly to move the money.

If you can move the money, you must put it into vehicles that qualify as 403(b) investments. Most mutual funds do. If you can indeed make the move, you will need to ensure that it is a tax-free transfer and not a distribution. Ask the provider of the investment you're moving your money to for a 403(b) application and transfer form.

"There are tons of ifs," says Martha Priddy Patterson, director of employ benefits policy and analysis at

KMPG

.

Start by talking to your human resources department or benefits administrator. You should also talk to the investment provider to get all the details on your specific investments.

If moving your money is out of the question, try to stimulate change and lobby your company for better investment choices. Too, your employer might be inclined to accept another investment provider into the program, which would let you avoid moving your money.

Your initial complaint was about the high fees you are paying. But you have to know what the fees are for. In your 403(b), you may be paying additional fees for things like an annuity or administrative costs of the plan.

Again, if you are still unhappy and dissatisfied, you should try talking to your employer first.

Send your questions and comments, along with your full name, to

deardagen@thestreet.com.

Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.