A bipartisan bill to allow 403(b) plans to offer collective investment trusts to participants has been reintroduced in the House and Senate.
The Retirement Fairness for Charities and Educational Institutions Act would amend federal securities laws to permit collective investment trusts, or CITs, in 403(b) plans, which are offered by public schools, churches and other nonprofit organizations. CITs are pooled investment vehicles offered by a bank or trust company.
The bill was reintroduced Feb. 5 in the Senate by Sen. Katie Britt, R-Ala.; Raphael Warnock, D-Ga.; Bill Cassidy, R-La.; and Gary Peters, D-Mich., and in the House by Reps. Frank Lucas, R-Okla.; Josh Gottheimer, D-N.J.; Bill Foster, D-Ill.; and Andy Barr, R-Ky.
A version of the bill was passed in the House last year but wasn’t voted on in the Senate, so it had to be reintroduced in the new congressional session.
Groups including the American Retirement Association, the American Bankers Association and the National Association of Government Defined Contribution Administrators have been asking lawmakers to pass the bill to fill gaps in SECURE 2.0, a retirement security bill passed in 2022.
SECURE 2.0 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.
“For too long, retirement options have unfairly disadvantaged public servants,” Lucas said in a news release. “While the required changes to our tax code for 403(b) plans have already been made, we now need to implement the necessary changes to securities law. This bipartisan bill aims to do exactly that and will allow for much-needed consistency across retirement plans. Hardworking Americans deserve solutions like this to see their retirement savings thrive.”
