House Passes INVEST Act, Sends it to Senate
The House of Representatives on Thursday afternoon passed H.R. 3383, the Incentivizing New Ventures and Economic Strength Through Capital Formation Act, commonly known as the INVEST Act, with a solid bipartisan vote of 302-123.
All Republicans present voted for the bill while 87 Democrats voted for and 123 voted against. The legislation now heads for the Senate, where if it reaches the floor and is passed without amendment, would go on to President Donald Trump to be signed into law.
The legislation bundles more than 20 individual bills aimed at modernizing capital markets, cutting regulatory red tape, facilitating small business financing, and expanding investor access to a broader range of investment options.
Among its most significant retirement-plan provisions is Section 202, the Retirement Fairness for Charities and Educational Institutions Act, which would amend federal securities laws to allow CITs and certain insurance separate accounts in 403(b) plans, aligning them more closely with 401(k) treatment.
“This legislation allows collective investment trusts (CITs) to be offered within 403(b) plans, which primarily serve teachers, healthcare professionals, clergy, and employees of nonprofit organizations. By expanding access to CITs, the bill provides greater flexibility to build more robust investment lineups with lower-cost options to enable the growth of principal and offer expanded investment solutions,” said Beth Halberstadt, Aon’s U.S. Defined Contribution Investments Leader, in a statement released shortly after the bill passed on Thursday. “We believe this advancement will help promote sustainable and effective retirement savings for all workers.”
Congressman Frank Lucas, a Republican representing Oklahoma, released a statement Thursday saying that for too long, retirement options have unfairly disadvantaged public servants. “Teachers, firefighters, and charity workers in Oklahoma do not enjoy the same access to quality retirement plans as everyone else. That is wrong,” Lucas said. “This bipartisan bill provides the proper consistency across retirement plans and delivers a much needed solution to allow hardworking Americans’ retirement savings to thrive.”
Other key bill provisions
Beyond allowing CITs in 403(b)s, the INVEST Act includes a number of other retirement-related bills, including three supported by the Insured Retirement Institute and four that the Investment Company Institute strongly advocated for due to their potential to create new and meaningful opportunities for investors to access capital markets.
“Capital formation is the engine of American economic growth. The INVEST Act makes several important improvements that will help millions of American investors succeed. ”
ICI President and CEO Eric J. Pan
“Capital formation is the engine of American economic growth. The INVEST Act makes several important improvements that will help millions of American investors succeed. When we broaden investment opportunities, make it easier for businesses to raise capital, make available more retirement plan options, and streamline disclosure practices, investors and markets benefit,” said ICI President and CEO Eric J. Pan in a statement today. “The U.S. capital markets are the deepest and most liquid in the world, and legislation such as this will help preserve that significant competitive advantage. ICI applauds the work of Chairman [French] Hill, Capital Markets Chair [Ann] Wagner, and the members of the House Financial Services Committee for their work to advance this package.”
U.S. House Committee on Financial Services Chairman Hill (R-AR) today commended Capital Markets Subcommittee Chair Wagner (R-MO) for her “tremendous work” in leading this legislation.
“Today, we ensured the American Dream remains within reach for every family and community across our nation. I applaud the House’s passage of the INVEST Act, which will keep our economy the envy of the world and secure a brighter future for generations to come,” Hill said. “Through this bipartisan package, we expanded access to investment capital for new and expanding businesses; provided new investment options for investors and retirement plans; and lowered the costs for companies seeking to go public.”
Wagner added that the INVEST Act will “supercharge our economy, provide stability for investors, and help small business owners grow and create jobs in communities around the nation.”
She said that for too long, capital has been concentrated largely in the coastal regions, leaving out critical regions like the Midwest. “The INVEST Act will alleviate that imbalance and support growth in our neighborhoods in Missouri and beyond. It will invest in our community, in our jobs, and in our future. I thank my colleagues for their strong support of my legislation and look forward to the Senate quickly taking action.”
In addition to the Retirement Fairness for Charities and Educational Institutions Act, ICI also advocated for following bills included in the INVEST Act package:
• The Increasing Investor Opportunities Act sponsored by Reps. Wagner and Gregory Meeks (D-NY): Will allow a closed-end fund to invest its assets more freely in securities issued by private funds and removes the loophole that allows activist investors to take over closed-end funds and force them into liquidity events or radically change their investment strategy.
• The Improving Disclosure for Investors Act sponsored by Reps. Bill Huizenga (R-MI), Jake Auchincloss (D-MA), Wiley Nickel (D-NC), and Bryan Steil (R-WI): Will bring investment disclosures into the 21st century by allowing electronic delivery to become the default mechanism to deliver certain regulatory documents to investors. Investors can still opt to receive paper documents if they want, preserving choice while modernizing the system.
• The Access to Small Business Investor Capital Act sponsored by Reps. Huizenga, Brad Sherman (D-CA), Andrew Garbarino (R-NY), and Janelle Bynum (D-OR): Will address a 2006 Securities and Exchange Commission (SEC) rule that led to misleading disclosure concerning business development company (BDC) fees and expenses in investor disclosures from acquiring funds. The unintended consequences of this rule ended up discouraging investment in BDCs. However, this legislation will make it easier for BDCs to grow, and in turn, further support mid-sized and small businesses.
IRI also supports the Improving Disclosure for Investors Act, permitting the electronic delivery of, and access to, documents the SEC requires registered investment companies to provide investors while preserving an individual investor’s right to receive information by paper if preferred.
“Electronic delivery provides a more widely accessible, cost-effective, and speedy means of conveying and receiving information than 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, making it easier for consumers to find information at the level of detail they prefer,” IRI said in a Dec. 11 press release.
Another provision of the INVEST Act IRI supports is the Senior Security Act, HR 1469, which would create an interdivisional task force at the SEC to investigate the challenges facing investors and determine meaningful recommendations to Congress about what other measures might be needed to increase protections for the most vulnerable Americans.
Other notable inclusions in the INVEST Act are the Fair Investment Opportunities for Professional Experts Act, which expands the accredited investor definition to include inflation-adjusted net worth and income tests and adds certain licensed professionals and individuals with qualifying education or experience; and the Equal Opportunity for All Investors Act, which requires the SEC to direct FINRA to create and administer an investment exam to earn accredited investor status.
For more details on the INVEST Act, check out these links provided by the House Financial Services Committee:
Click here for the Rules Committee Print of the INVEST Act.
Click here for a one-pager.
Click here for a section-by-section.
Click here for a three-pager.
SEE ALSO:
• Advocates for CITs in 403(b)s Express Support for INVEST Act that Could Pass House Today
• INVEST Act in House Could Finally Be Vehicle to Allow CITs in 403(b)s
• Multiple Retirement Bills—Including CITs in 403(b)s—Being Marked Up in House This Week
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.