GOP Bill Introduced in Senate to Permit CITs in 403(b) Plans
The latest bill is one of several pending measures that aim to allow 403(b) plans to invest using the cheaper investment vehicle.
Several Republican members of the U.S. Senate Committee on Banking, Housing and Urban Affairs have introduced a bill that would allow 403(b) plans to invest using collective investment trusts—something many in the retirement industry have been pushing for because of the cost savings the CIT structure offers.
The provision is part of a broader bill, the Empowering Main Street in America Act of 2024, which aims to promote greater capital formation in U.S. public and private markets, expand investment opportunities for retail investors, foster investor confidence and hold regulators accountable through increased oversight.
The bill, S.5139, would amend the Securities Act of 1933 and was introduced by Senator Tim Scott, R-South Carolina, the ranking member of the Senate Banking Committee. Senators Mike Crapo, R-Idaho; Mike Rounds, R-South Dakota; Thom Tillis, R-North Carolina; John Kennedy, R-Louisiana; Bill Hagerty, R-Tennessee; Cynthia Lummis, R-Wyoming; Katie Britt, R-Alabama; Kevin Cramer, R-North Dakota; Steve Daines, R-Montana; and Jerry Moran, R-Kansas, are co-sponsors of the bill.
Under Title II (“Responsibly Expanding Investment Opportunities for Retail Investors”) of the bill, Section 205 would allow 403(b) plans to invest in CITs.
CITs can be cheaper and more flexible than mutual funds, in part because the instruments are not securities and do not need to be registered with the Securities and Exchange Commission. Instead, CITs are considered a bank product and regulated by the Office of the Comptroller of the Currency.
A separate bill that would allow 403(b)s to include CIT investments was introduced in August by a bipartisan group of senators, including Britt, as well as Senators Gary Peters, D-Michigan; Bill Cassidy, R-Louisiana; and Raphael Warnock, D-Georgia.
Since being introduced, that bill, which reflects an amendment to the Retirement Fairness for Charities and Educational Institutions Act of 2024 (S.4917), has been read twice and referred to the Committee on Banking, Housing and Urban Affairs. The bill proposes to amend the Investment Company Act of 1940 to allow 403(b) plans, as well as certain 401(a) plans, governmental plans and church plans, to invest using CITs.
Similar to the Empowering Main Street in America Act, this bill also proposes to amend the Securities Act of 1933.
The Retirement Fairness for Charities and Education Institutions Act was an amendment to the larger Expanding Access to Capital Act of 2023, passed by the House of Representatives in March.
The various bills aim to complete an effort begun in the SECURE 2.0 Act of 2022 to enable 403(b) plans and governmental plans subject to the Employee Retirement Income Security Act to invest in instruments beyond the annuity contracts and mutual funds to which they are now limited.
Spokespeople for Britt and Scott did not immediately respond to requests for comment on the likelihood of either bill being passed in the House or Senate this year.