A bill that would authorize the use of collective investment trusts (CITs) in 403(b)s is headed to the Senate after the House of Representatives passed it today.
The Expanding Access to Capital Act (HR 2799), sponsored by House Financial Services Committee Chair Patrick McHenry, includes three measures that were approved as amendments, including the 403(b) plan measure, the Retirement Fairness for Charities and Educational Institutions Act of 2023, HR 3063. It provides teachers, hospital workers, clergy, and non-profit employees who are 403(b) plan participants access to the same cost-efficient investment options already available to all other employer-sponsored retirement plan participants. It corrects an oversight that was intended to be included in 2022 SECURE 2.0 legislation but wasn’t included in the final language of that retirement reform bill.
The American Retirement Association, the Insured Retirement Institute and the Investment Company Institute have all expressed support for the bill.
“There are over 15 million 403(b) plan participants that would benefit from gaining access to CIT investments in their plans. We will continue pushing Congress hard to get this done,” American Retirement Association CEO Brian Graff said in an article posted on the NAPA website Thursday.
“The proposed changes in the legislation will allow 403(b) plan providers increased flexibility to build more robust investment lineups for plan participants…”
IRI’s Wayne Chopus
“Retirement savers participating in other employer-sponsored retirement plans, such as 401(k) plans, have access to cost-effective collective investment trusts (CITs) and unregistered insurance company separate accounts,” said Wayne Chopus, President and CEO at IRI. “The proposed changes in the legislation will allow 403(b) plan providers increased flexibility to build more robust investment lineups for plan participants consisting of lower-cost options that preserve principal and provide protected guaranteed lifetime income solutions.”
One of the other two amendments directs the Securities Exchange Commission (SEC) to write a rule permitting the electronic delivery of regulatory-required documents to investors. Like the CITs in 403(b)s amendment, it is another of the priorities listed in IRI’s 2024 Retirement Security Blueprint, released earlier this week.
The e-Delivery measure, the Improving Disclosure for Investors Act, would require the SEC to include a mechanism to allow participants to opt out of electronic delivery and receive paper documents. The change provided in the bill is necessary as the SEC rescinded the substantial applicability of its Rule 30e-3, which had previously allowed for the electronic delivery of certain shareholder reports.
“IRI supports the use of electronic means as the default mechanism for document delivery,” Chopus said. While individual investors should have the option to request paper delivery, in the modern world, paper should be the exception, not the rule.”
IRI noted in a press release today that electronic delivery is safer and more effective than traditional paper delivery. Using electronic delivery to communicate with investors also creates opportunities for the industry to provide dynamic, real-time information rather than static data. Through a layered disclosure approach, consumers can more easily navigate electronic information and find the level of detail they prefer.
“IRI will focus our efforts on encouraging the Senate to quickly consider and pass these IRI-advocated measures,” Chopus said.
The third amendment, “The Increasing Investor Opportunities Act,” sponsored by Reps. Ann Wagner (R-MO) and Gregory Meeks (D-NY) allows a closed-end fund to invest its assets more freely in securities issued by private funds and removes the loophole now allowing activist investors to take over funds to force closed-end funds into liquidity events or radically change their investment strategy.
“These amendments will go a long way to meaningfully protect and strengthen Americans’ ability to secure their financial futures. The Senate should pass this package as soon as possible,” ICI President and CEO Eric Pan said in a statement Thursday.
SEE ALSO:
• CITs in 403(b)s Clears Another Hurdle
• IRI Releases 2024 Retirement Security Blueprint Featuring 33 Legislative Proposals
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
