The House Financial Services Committee advanced a bipartisan bill that would allow 403(b) plans to offer collective investment trusts.
The Retirement Fairness for Charities and Educational Institutions Act of 2023 was advanced Wednesday in a 35-12 vote and can now be considered by the full House.
The bill, which was introduced May 2 by Rep. Frank Lucas, R-Okla., Rep. Andy Barr, R-Ky., Rep. Bill Foster, D-Ill., and Rep. Josh Gottheimer, D-N.J., would amend federal securities law to authorize the use of CITs and unregistered insurance company separate accounts within 403(b) plans.
While SECURE 2.0, a comprehensive retirement security package Congress passed in December, included a measure that changed the tax code with respect to CITs and 403(b) plans, lawmakers couldn't agree on changing sections of securities laws that would have allowed 403(b) plans to offer CITs, which are already available to other types of defined contribution plans and some 403(b) church plans. The security laws need to be changed via legislation because CITs are bank products offered by a bank or trust company and governed by the Office of the Comptroller of the Currency and state banking regulators. CITs are considered unregistered securities.
John James, head of Vanguard Group's institutional investor group, said in a statement that the bill would fix a historical inequity across retirement plans. "Educators, and other employees of non-profits and schools, should have access to the same low-cost investment vehicles, such as collective investment trusts, as their counterparts in other retirement plans," Mr. James said. "Vanguard commends the bipartisan efforts to create parity across the retirement savings system, which will ultimately improve Americans' ability to save towards a secure retirement."
The committee on Wednesday also advanced a bill in a 45-2 vote that would extend for six months a Securities and Exchange Commission no-action letter that allows broker-dealers to continue accepting payments for research reports while complying with a European Union directive, MiFID II. Under an amendment to the bill, the SEC would also have to study the potential impact of the expiration of the no-action relief, which is slated to happen in July.
"Without an extension of the no-action relief, impacted buy-side managers will lose access to important research services and the competitiveness of U.S. markets and research providers will be negatively impacted," said Kenneth E. Bentsen Jr., president and CEO of the Securities Industry and Financial Markets Association, in a statement. "SIFMA strongly believes there is no reason to ask U.S. firms to tie themselves in knots to comply with a European law when the EU is actively considering changes to it. The bipartisan support for directing the SEC to extend the no-action relief is the correct path forward."
