The American Retirement Association has begun a publicity and lobbying campaign asking senators to approve, before Congress adjourns in a few weeks, a bill allowing 403(b) plans to offer collective investment trusts to participants.
The House of Representatives approved a bill in March that contained the CITs-in-403(b) provision, but the Senate version has been sitting in the Senate Banking, Housing and Urban Affairs Committee since July.
Given the upcoming Thanksgiving and Christmas recesses, time is running out on a Senate bill with bipartisan support.
ARA recently launched a campaign that says 14.5 million teachers, nurses and other non-profit workers in 403(b) plans cannot invest in CITs, even though 401(k) plan workers can do so. Participants in 457(b) plans and the federal Thrift Savings Plan also can invest in CITs.
The publicity campaign exhorts employees to tell their senators to pass the Retirement Fairness for Charities and Educational Institutions Act, citing potential cost savings for CITs.
“Like everything in Washington, nothing is certain,” said James Locke, ARA’s director of legislative services, when asked if there was enough time for senators to act before Congress adjourns. ARA has been talking to many senators including the bill’s cosponsors, he said.
Sometimes, individual bills can be added to other bills as part of a legislative package that can move faster through the Senate than a single-subject bill, he said. Because the CIT provision in the House bill is the same as the Senate CIT bill, Locke said there wouldn’t be a need to a conference between the House and Senate over the CIT provision.
“Obviously, we would like to do it now,” said Locke, adding that the subject would have to considered anew during the next Congress if the Senate doesn’t act.
Because the “retirement space is generally bipartisan,” Locke said the Senate with a GOP majority would still likely act on the bill.
The House in March approved a bill containing multiple provisions including the CITs-in-403(b) language identical to the Senate bill now in committee. The vote was 212-205 with no Democratic support.
Groups such as ARA, the American Bankers Association and the National Association of Government Defined Contribution Administrators have been asking legislators to pass a bill that would address certain gaps in the December 2022 enactment of SECURE 2.0.
That law made changes in the tax code to enable 403(b) plans to offer CITs, but legislators couldn’t agree in revising certain securities laws. Although mutual funds are governed by the Securities and Exchange Commission, CITs are governed by the Office of the Comptroller of the Currency and state banking regulators. That means CITs are considered unregulated securities.
To allow CITs to be offered to 403(b) plans, Congress must revise the Investment Company Act of 1940, the Securities Act of 1933 and the Securities Exchange Law of 1934.
Complicating matters is another bill filed with the Senate Banking, Housing and Urban Affairs Committee in September. The bill, which has a CIT provision, is cosponsored only by GOP members and contains many other provisions. ARA isn’t commenting on this bill, except to support the CIT component, Locke said.
This bill, the Empowering Main Street in America Act of 2024, was criticized recently by several consumer groups including Public Citizen and Consumer Federation of America.
“The legislation would harm retail investors, damage market integrity, destroy capital and hamstring the SEC’s and state regulators’ ability to carry out their missions,” said the Nov. 13 letter the groups sent to senators.
Although the letter criticized the 403(b) component in this bill, the ARA pointed out that the groups didn’t understand the regulation of CITs because they mistakenly thought CITs are governed by the SEC.
“The groups on this letter flat-out got this one wrong,” ARA CEO Brian Graff said in a Nov. 18 post on the ARA website.
“Not only are CITs significantly regulated, they consistently offer investors substantially lower investment fees compared to mutual funds,” he wrote. “That’s why plan fiduciaries have been advising employers to offer CITs in 401(k) plans covering tens of millions of workers.”
