A bipartisan bill that would enable 403(b) plan sponsors to offer collective investment trusts to their participants was introduced Thursday in the House.
Collective investment trusts, or CITs, are collectively managed investment vehicles that typically have lower costs and more flexibility than the types of annuity contracts and mutual funds in which 403(b) plans are limited to investing, noted Rep. Jimmy Panetta, D-Calif., who introduced the Public Service Retirement Fairness Act, in a news release.
Currently, CITs are allowed for most DC plans, such as 401(k), 457(b), 401(a) and church-sponsored 403(b). But the biggest providers of 403(b) plans — colleges and universities, public school systems and hospitals — cannot offer CITs.
"Teachers and other public-service-oriented employees deserve flexibility when it comes to investing in their retirement," Mr. Panetta said in the news release. "My bipartisan bill will level the playing field for these employees, and others who have committed their careers to public service, potentially increasing their retirement savings by thousands of dollars."
The legislation, which would amend the Internal Revenue Code to permit inclusion of CITs as investment vehicles in 403(b) retirement plans, is cosponsored by Reps. Ron Estes, R-Kan.; Brendan Boyle, D-Pa.; Darin LaHood , R-Ill.; Madeleine Dean, D-Pa.; and Andy Barr, R-Ky. It is a companion to a provision introduced in Senate last year by Sens. Rob Portman, R-Ohio, and Ben Cardin, D-Md., part of a larger retirement security package known as the Retirement Security and Savings Act.
Matt Petersen, executive director of the National Association of Government Defined Contribution Administrators, said in a statement that the bill provides the potential for retirement asset growth for plan participants.
"Lack of access to the same breadth of investment structures long available to other types of governmental DC plans is costing 403(b) plan participants potentially thousands of dollars in retirement savings due to higher investment expenses and reduced returns and impeding 403(b) plan sponsors' ability to build powerful, talent-attracting plans," Mr. Petersen said.
With roughly $500 billion of 403(b) assets locked out of CITs, Vanguard Group estimates that the cost savings to 403(b) participants in plans that offer CITs could amount to as much as $250 million per year, said James Martielli, head of Vanguard's defined contribution advisory services, in a statement. "Over time, this could translate into billions of dollars going back to retirement savers," Mr. Martielli added.