Republicans on the Senate Banking Committee introduced a legislative package to permit 403(b) plans to invest in collective investment trusts, allow more individuals to invest in private markets and expand investment options for venture capital funds.
Sen. Tim Scott, R-S.C., the Banking Committee’s ranking member, and 10 other Senate Republicans — nine of whom serve on the Banking Committee — introduced the Empowering Main Street in America Act on Sept. 24.
The bill includes a host of provisions concerning the nation’s capital markets, including one to allow 403(b) plans to invest in collective investment trusts, or CITs.
While SECURE 2.0, a comprehensive retirement security package Congress passed in December 2022, 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.
Brian Graff, CEO of the American Retirement Association, said in a statement that the CIT provision will “expand access to lower cost investments in the retirement plans of governmental and nonprofit workers.”
Several bills have been introduced in recent years to address the CIT issue, including a bipartisan vehicle last month.
The bill package would also offer U.S. investors another pathway to participate in private markets by expanding the definition of accredited investor to include individuals that successfully pass a qualitative examination established by the Securities and Exchange Commission, a state securities commission, or the Financial Industry Regulatory Authority. Further, it would permit self-certification of accredited status and allows anyone to invest up to 10% of their income in private securities.
Currently, individual investors can qualify as accredited only if they meet certain financial criteria, such as a net worth of more than $1 million, or professional criteria, such as whether they work as a director, executive officer or general partner for the company selling the securities.
Moreover, the bill would increase the permitted capital funds to be raised by a venture capital fund to $50 million from $10 million and expand the permitted number of investors that can participate in such a fund to 500 investors from 250, according to a fact sheet.
Also concerning venture capital funds, the bill would expand “qualifying” investments to include secondaries and fund-of-fund investments.
“This key provision would expand access to capital in emerging markets and address liquidity pressures facing many venture capitalists,” said Bobby Franklin, president and CEO of the National Venture Capital Association, in a statement.
Separately, the bill package would expand oversight of the SEC and require the agency to perform a cost-benefit analysis when exercising its rule-making authority, specifically identifying the nature and source of the problem each rule is seeking to address, the fact sheet noted.
