The long-awaited “fix” of allowing CITs to be allowed in 403(b) plans took another big step forward on Capitol Hill Thursday.
Collective Investment Trust investments were supposed to be allowed in 403(b) plans by way of 2022 SECURE 2.0 legislation, but that specific provision somehow didn’t make it into the wide-ranging retirement reform law.
A SECURE 2.0 “fix” that would allow 403(b)s to invest in CITs was officially introduced in the House in May 2023 in the form of “The Retirement Fairness for Charities and Educational Institutions Act of 2023,” an amendment sponsored by Reps. Frank Lucas (R-OK), Bill Foster (D-IL) and Josh Gottheimer (D-NJ). It allows 403(b) plans often used by people working in education, charitable organizations, and public service to invest in CITs, which are highly regulated, pooled investment funds that are often lower cost and would allow employees in the public sector to maximize their retirement savings, eliminating the discrepancy between public and private sector-backed plans.
The amendment to capital markets legislation passed the House with strong bipartisan support on Thursday, and a broader package including three bipartisan amendments is expected to be voted on Friday.
Together, the amendments would “expand opportunities for American retirement savers and investors,” according to a press release from the Investment Company Institute.
The three amendments are part of H.R. 2799, the “Expanding Access to Capital Act of 2023,” sponsored by House Financial Services Committee Chair Patrick McHenry.
“ICI thanks Chair McHenry and the bill sponsors of these amendments for their leadership and commends the many members of the House from both parties for passing these important pieces of legislation,” said ICI President and CEO Eric Pan. “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.”
On LinkedIn, American Retirement Association CEO Brian Graff noted that ARA supported the amendment to the capital markets legislation, and said the bipartisan support for the 403(b) plan bill (the amendment) “will increase our prospects as the bill moves on to the Senate and hopefully passage into law.”
The other two amendments are:
• “The Increasing Investor Opportunities Act,” amendment sponsored by Reps. Ann Wagner (R-MO) 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 now allowing activist investors to take over funds to force closed-end funds into liquidity events or radically change their investment strategy.
• “The Improving Disclosure for Investors Act of 2024,” amendment 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. Customers can still choose to receive paper documents if they want, so all Americans benefit from this amendment.
Participation rates increased in 403(b) plans last year and hit a record high, according to PSCA’s 2023 403(b) Survey.
SEE ALSO:
• House Financial Services Committee Passes Bill Approving CITs in 403(b)s
• 403(b) Participation Hits All-Time High: PSCA