At a glance
- The bill, H.R. 1013, is the Retirement Fairness for Charities and Educational Institutions Act, sponsored by Rep.
- For sponsors of 403(b) plans and the consultants who build their menus, a CIT sleeve could lower the cost of the same index exposure.
- CIT fees are as much as 53% lower than mutual fund fees, according to the American Retirement Association, which supports the legislation.
403(b) plans would be allowed to hold collective investment trusts under a bill that cleared the House Rules Committee 7-3 late Monday, setting up a possible House floor vote as soon as Thursday.
The bill, H.R. 1013, is the Retirement Fairness for Charities and Educational Institutions Act, sponsored by Rep. Josh Gottheimer (D-N.J.) and Rep. Frank Lucas (R-Okla.). It would amend three investment and securities acts so 403(b) plans, used by public schools, universities, hospitals and nonprofits, can buy CITs. CITs are already common in 401(k) plans, governmental 457(b) plans and the federal Thrift Savings Plan.
For sponsors of 403(b) plans and the consultants who build their menus, a CIT sleeve could lower the cost of the same index exposure. Recordkeepers that administer 403(b) books would likely face the cost comparisons their 401(k) platforms already run. It still needs Senate passage and a signature.
CIT fees are as much as 53% lower than mutual fund fees, according to the American Retirement Association, which supports the legislation. ARA research puts CIT holdings at more than $4.6 trillion in retirement plans.
A tax-law and securities-law mismatch
SECURE 2.0 removed the IRS regulations that prevented 403(b) accounts from investing in CITs, but federal securities law stayed in place and access remains difficult.
The legislation is aimed at giving more than 14 million 403(b) participants access to the lower-cost vehicles. A companion Senate bill is pending.
Reported by the Policy & ERISA desk from 401(k) Specialist. Published . Corrections