An Update on CIT Availability in 403(b) Plans: Senate Bill Gains Bipartisan Momentum
The retirement landscape is poised for a significant change as a bipartisan group of U.S. Senators recently introduced a bill that would allow 403(b) plans to include Collective Investment Trusts (CITs) among their investment options. This move follows the House of Representatives' passage of a similar bill, representing a major step forward in expanding investment opportunities for millions of 403(b) plan participants, which includes medical professionals, non-profit religious workers, and the teaching profession.
A Unifying Cause in The Senate
The introduction of the Senate bill, S.4917, led by Senator Britt (R) and co-sponsored by Senators Warnock (D), Cassidy (R), and Peters (D), reflects a moment of bipartisan cooperation, which is notable in the current election cycle. In an increasingly polarized political environment, this collaboration underscores a shared commitment to improving the nation’s retirement savings framework. The bipartisan nature of this bill is particularly noteworthy as it demonstrates a collective recognition of the importance of providing equitable retirement options to all Americans, regardless of the type of retirement plan they are enrolled in.
Promoting Investment Parity Across Retirement Plans
One of the primary goals of this legislation is to bring 403(b) plans in line with other retirement savings vehicles such as 401(k), 457(b), and federal Thrift Savings Plans by allowing CITs as investment options. Currently, 403(b) plans are limited in the types of investment offerings allowing mutual funds but not CITs, which are known for their general cost efficiency and potential for higher returns compared to mutual funds.
CITs offer a distinct advantage in terms of operational efficiency. They are typically less expensive to manage and administer than mutual funds, which can result in lower fees for plan participants. Over time, these cost savings can significantly impact the growth of retirement savings, making CITs an attractive option for inclusion in 403(b) plans.
Understanding the Regulatory Framework
CITs are not only efficient but are also governed by a robust regulatory framework that provides stronger fiduciary oversight. Unlike mutual funds, CITs are subject to the Employee Retirement Income Security Act of 1974 (ERISA), which is administered by the Employee Benefits Security Administration of the Department of Labor. Under ERISA, CITs are available exclusively to qualified retirement plans and are chosen by fiduciaries who are obligated to act in the best interests of plan participants.
Moreover, CIT trustees, whether operating as banks or trust companies, are under the supervision of national or state banking regulators, adding an additional layer of regulatory governance and oversight. Compliance with IRS regulations further ensures that CITs maintain their tax-exempt status, which benefits the trusts and their investors.
The Path Forward: We All Can Be Advocates
As the bill moves forward in the Senate, the involvement of all stakeholders—retirement plan fiduciaries, participants, and service providers—becomes crucial. The policy arguments supporting this legislation are compelling, emphasizing the need for investment parity and the potential for improved retirement outcomes for 403(b) plan participants.
At Great Gray Trust Company, we are deeply committed to this cause. Our role as a leader in the CIT space positions us uniquely to advocate for the inclusion of CITs in 403(b) plans. We believe that expanding investment options in this way will contribute to a more equitable and effective retirement savings system, offering greater opportunities for a broader set of investors to achieve their retirement goals.
We encourage our allies in the retirement industry to join us in supporting this important legislative effort. By working together, we can help ensure the passage of this bill and provide 403(b) plan participants with access to the same investment opportunities that have long been available in other retirement plans.
Conclusion – For Now…
The introduction of this Senate bill marks a pivotal moment in the ongoing effort to enhance retirement savings options for all Americans. With bipartisan support and a clear path forward, now is the time for the retirement ecosystem to rally behind this legislation. Together, we can make a meaningful impact on retirement, ensuring that 403(b) plan participants have a more complete set of tools to use to build a secure financial future.
Great Gray Trust Company, LLC Collective Investment Funds (“Great Gray Funds”) are bank collective investment funds; they are not mutual funds. Great Gray Trust Company, LLC serves as the Trustee of the Great Gray Funds and maintains ultimate fiduciary authority over the management of, and investments made in, the Great Gray Funds. Great Gray Funds and their units are exempt from registration under the Investment Company Act of 1940 and the Securities Act of 1933, respectively.
Investments in the Great Gray Funds are not bank deposits or obligations of and are not insured or guaranteed by Great Gray Trust Company, LLC, any bank, the FDIC, the Federal Reserve, or any other governmental agency. The Great Gray Funds are commingled investment vehicles, and as such, the values of the underlying investments will rise and fall according to market activity; it is possible to lose money by investing in the Great Gray Funds.
Participation in Collective Investment Trust Funds is limited primarily to qualified retirement plans and certain state or local government plans and is not available to IRAs, health and welfare plans and, in certain cases, Keogh (H.R. 10) plans. Collective Investment Trust Funds may be suitable investments for plan fiduciaries seeking to construct a well-diversified retirement savings program. Investors should consider the investment objectives, risks, charges, and expenses of any pooled investment fund carefully before investing. The Additional Fund Information and Principal Risk Definitions (PRD) contains this and other information about a Collective Investment Trust Fund and is available at www.greatgray.com/principalriskdefinitions or ask for a free copy by contacting Great Gray Trust Company, LLC at (866) 427-6885.
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