Advocates for CITs in 403(b)s Express Support for INVEST Act that Could Pass House Today
EDITOR’S NOTE: Since this article was published, the U.S. House of Representatives passed the INVEST Act, H.R. 3383, by a vote of 302-123 this afternoon. All Republicans voted for the bill while 87 Democrats voted for and 123 voted against.
The retirement industry has long been calling for the elimination of the outdated regulatory distinction that keeps collective investment trusts (CITs) out of 403(b) plans, and they’re speaking up once again as the House of Representatives considers a wide-ranging bipartisan legislative package that would finally get it done.
The INVEST Act (H.R. 3383), formally known as the Incentivizing New Ventures and Economic Strength Through Capital Formation Act, could be voted on as soon as today by the House after being debated on the House floor last night. 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.
Section 202 is perhaps chief among the measures in the package that retirement industry advocates have lobbied for, with the American Retirement Association, the Insured Retirement Institute, the Investment Company Institute and more all calling for this change.
Section 202 of the legislation would amend federal securities law to authorize the use of collective investment trusts (CITs) and unregistered insurance company separate accounts within 403(b) retirement savings plans.
This would provide 403(b) retirement plan participants access to the same cost-efficient investment options already available to all other employer-sponsored retirement plan participants. These retirement plans principally serve teachers, hospital workers, clergy, and non-profit employees.
“Retirement savers participating in other employer-sponsored retirement plans, such as 401(k) plans, have access to cost-effective collective investment trusts and unregistered insurance company separate accounts,” said Wayne Chopus, President and CEO at IRI. “The legislation will provide parity for 403(b) plan participants and also allow plan providers increased flexibility to build more robust investment lineups with lower-cost options that preserve principal and provide protected guaranteed lifetime income solutions.”
ARA expressed its support for Section 202 of the legislation in a Dec. 4 letter to House leadership.
“This critical provision will enhance retirement security for American workers such as public school teachers, charity workers, and other retirement savers who wish to invest in collective investment trusts (CITs) under their 403(b) plans, a long-standing option already available to private-sector employees through 401(k) plans,” wrote ARA Executive Director and CEO Brian Graff. “Currently, outdated securities laws unfairly prohibit 403(b) plan participants from investing in CITs, despite their widespread use and success in 401(k) plans.”
Graff went on to note that the House passed this bipartisan provision last Congress, but it stalled in the Senate. “This Congress, the standalone bill (H.R. 1013) was reported out of the Financial Services Committee with overwhelming bipartisan support, 43-8. You now have a real opportunity to get this bill across the finish line,” Graff wrote.
The National Association of Government Defined Contribution Administrators (NAGDCA) and the National Council on Teacher Retirement (NCTR), representing the interests of public-sector defined-contribution plan sponsors, have also supported the bill as a path to modernize retirement benefits for roughly 14-15 million educators, nonprofit staff, and government workers.
“NAGDCA has been a long-time proponent of including CITs in 403(b) plans, given their lower-cost basis than that of mutual funds and annuities, which, under current law are permitted in private sector 401(k) plans and all other defined contribution retirement plans other than governmental 403(b) plans,” NAGDCA Executive Director Matt Petersen said in a press release earlier this year.
Financial firms stump for bill
On Dec. 10, Denver-based recordkeeper Empower announced its strong support for key elements of the INVEST Act, including Section 202, which the statement said would create long-overdue investment parity for 403(b) plans.
“This 403(b) measure completes important progress made under SECURE 2.0 and ensures that those who dedicate their careers to education and public service have access to the same investment opportunities as other American workers. It is a common-sense update that will strengthen retirement outcomes for millions,” said Ed Murphy, President and CEO of Empower.
MissionSquare Retirement, a nonprofit financial services company dedicated to public service employees (government, education, healthcare) offering retirement plans, investments, financial advice, and wealth management, also expressed support for the measure this week.
“At MissionSquare, we remain strongly in favor of programs that create parity in retirement investment options, as this is essential to strengthening the financial security of American workers,” said Andre Robinson, CEO and President of MissionSquare. “Ensuring all working Americans have access to the tools they need to achieve long-term stability is vital, and we urge Congress to advance this legislation and expand access to CITs for greater flexibility and choice.”
TIAA and its investment management arm Nuveen sent a letter of support for the bill to House leaders signed by TIAA President and CEO Thasunda Brown Duckett.
“This capital formation package will unlock low-cost investment options for retirement savers, spur economic growth and innovation, reduce unnecessary regulatory burdens, and modernize our capital markets,” Duckett wrote.
She went on to note that TIAA is the leading provider of retirement services for American workers in academic, research, medical, and cultural fields—commonly known as the 403(b) retirement market.
“The Retirement Fairness for Charities and Educational Institutions Act would make collective investment trusts (CITs) available to participants in 403(b) retirement plans… CITs can also provide the flexibility to include lifetime income solutions in retirement investments, helping retirees more easily convert retirement savings into guaranteed sources of lifetime income. Enactment of this legislation would create the opportunity for millions more workers to access these low-cost investment options already available in the 401(k) market.”
What’s next
The House could pass the INVEST Act as soon as today, after debating it on the floor on Wednesday evening. Rep. Ann Wagner (R-MO) mentioned in remarks in support of the legislation that 81 organizations “from every corner of the country” have expressed support.
Rep. Maxine Waters (D-CA) spoke out against the bill, arguing that the addition of “three poison pills thrown in at the last minute” were her reasons for doing so. Section 202 was one, as Waters argued that removing 403(b) plans from the oversight of federal securities laws will benefit “Wall Street middlemen” and retirement plan consultants at the expense 403(b) investors.
With strong bipartisan support, the bill is expected to pass the House and would then head to the Senate, where it would be referred to one or more Senate committees—most likely the Senate Banking Committee. If it is then sent to the Senate floor and passes a vote without revision, it would be sent directly to President Trump, who could sign it into law. If the Senate passes an amended version, the bill goes back to the House.
SEE ALSO:
• 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
• Bipartisan Bill to Streamline 401(k) Distribution Options, Expand In-Service Rollover Choices is Back
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.