INVEST Act in House Could Finally Be Vehicle to Allow CITs in 403(b)s
After years of stalled proposals and piecemeal progress, the long push to let 403(b) plans use collective investment trusts (CITs) may finally be nearing the finish line.
According to the Insured Retirement Institute, the House of Representatives is poised to vote next week on the INVEST Act—a newly introduced bipartisan legislative package that folds in 20 previously approved bills, notably including 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.
“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…”
IRI’s Wayne Chopus
On Dec. 2, House Committee on Financial Services Chairman French Hill (R-AR), Capital Markets Subcommittee Chairman Ann Wagner (R-MO), Rep. Gregory Meeks (D-NY), and Rep. Josh Gottheimer (D-NJ) unveiled the INVEST Act in an effort to cut Washington red tape, empower small businesses and entrepreneurs, and give Americans more freedom to invest.
“Our bill puts the full power of America’s capital markets back to work for the people by modernizing rules, expanding access, and eliminating unnecessary burdens on small businesses,” said Chairman Hill.
By including the Retirement Fairness for Charities and Educational Institutions Act in the INVEST Act, lawmakers may finally bring long-awaited parity to 403(b) plans that mostly serve teachers, hospital workers, clergy, and non-profit employees.
IRI is among the retirement industry backers that have strongly advocated for this move. Under current law, 403(b) plans cannot invest in CITs. That’s because while the tax law was changed by SECURE 2.0 Act in 2022 to allow custodial 403(b) accounts to use “group trusts,” the necessary changes to federal securities laws were never adopted—meaning CITs, which are usually bank-/trust-based pooled investments (not SEC-registered mutual funds), remain unavailable to most 403(b) plans.
“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,” said IRI President and CEO Wayne Chopus in a statement released Wednesday.
A Vanguard report released earlier this year found that allowing 403(b) plans to invest in collective investment trusts (CIT) would bring fee savings for workers of about 0.08% percentage points on average per year compared to mutual funds. For the median worker with an annual salary of $74,000, the report claims a 0.08%-0.09% cost difference results in $23,000-$28,000 in forgone retirement savings by age 65.
In addition to the Retirement Fairness for Charities and Educational Institutions Act, the INVEST Act includes two other IRI-supported measures, the Senior Security Act and the Improving Disclosure for Investors Act. All three bills are part of IRI’s Federal Retirement Security Blueprint. The Retirement Fairness for Charities and Educational Institutions Act also was among several bills included in IRI’s recently announced action plan, “A More Secure Retirement for America’s Workers and Retirees.”
If the House passes The INVEST Act, it moves to the Senate, where it would be referred to one or more Senate committees—most likely the Senate Banking Committee. It if 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:
• House and Senate Reintroduce CITs in 403(b) Plans Legislation
• 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
• CITs in 403(b)s Saga Adds More Twists and Turns
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.
