CITs in 403(b) Plans Back on the Table

Another Chance for Retirement Fairness

In a significant legislative development, bipartisan groups of U.S. Senators and Members of Congress have introduced the Retirement Fairness for Charities and Educational Institutions Act in both the Senate and House of Representatives to provide 403(b) plans with access to collective investment trusts (CITs). Senators Katie Britt, Raphael Warnock, Bill Cassidy, and Gary Peters introduced the bill in the Senate, and Representatives Frank Lucas, Josh Gottheimer, Bill Foster, and Andy Barr (R-KY) introduced the bill in the House. These bipartisan bills amend the securities laws to allow 403(b) retirement plans – commonly utilized by employees of non-profit organizations such as public schools, universities, hospitals, churches, and charities—to invest in CITs.

Understanding the Implications

Currently, 403(b) plans do not have access to the same cost-effective and strictly regulated investment options available to other retirement plans, including 401(k) plans for private sector employees and 457(b) plans for state and local government employees and employees of non-church tax exempt organizations. The proposed legislation levels the playing field by providing 403(b) plans with the same access to CITs that these other retirement plans have been afforded for decades.

The Path Forward

The introduction of this bill marks a crucial step toward enhancing retirement savings options for the approximately 14.5 million Americans who use 403(b) plans to save for retirement. In 2022, Congress expressed its intent to level the playing field by amending the tax laws to allow 403(b) plans to invest in CITs. The proposed legislation would finish the job by amending the securities laws to allow 403(b) plans to access. While the introduction of the proposed legislation is a welcome development, the active support of stakeholders across the retirement planning community is needed to call attention to the urgency of its passage.

Call to Action

As professionals dedicated to ensuring equitable retirement opportunities, it is incumbent upon us to advocate for this legislative change. By supporting the inclusion of CITs in 403(b) plans, we can help non-profit employees achieve greater retirement security through access to lower-cost investment vehicles that have the potential to yield meaningfully higher savings over time.

We encourage plan sponsors, financial advisors, and industry stakeholders to join this cause. Engage with policymakers, educate plan participants about the benefits of CITs, and collaborate to promote policies that enhance the retirement readiness of all workers, regardless of their employment sector.

Together, we can drive meaningful change that empowers non-profit employees to build a more secure financial future.