Momentum continues to build for expanding investment opportunities in 403(b) plans, with a significant new development this week. Prior to the August recess, a bipartisan group of senators introduced S.4917, a companion bill to the House-passed legislation that would allow 403(b) plans to invest in Collective Investment Trusts (CITs). Now, the Senate Banking Committee has taken another major step forward in this effort.
403(b) CITs Included in New Capital Markets Bill
In an important parallel move, Senate Banking Committee Ranking Member Tim Scott (R-SC), alongside nearly every Republican member of the Senate Banking Committee, introduced a broader capital formation bill, the Empowering Main Street in America Act. This legislation includes identical language to the House-passed bill, allowing 403(b) plans to invest in CITs. While the larger bill reflects partisan dynamics, its inclusion of the CIT expansion highlights the strong interest among key committee members in advancing the critical and necessary securities law exemptions to finally achieve this several-years-long initiative.
The bipartisan support for CITs in 403(b) plans remains a notable trend, with both parties recognizing the need to modernize and broaden retirement plan investment options by providing participants with access to other cost-effective and efficient vehicles like CITs and unregistered separate accounts. The addition of this provision in the Empowering Main Street in America Act is further evidence that the expansion of 403(b) CITs is gaining momentum, even as part of a larger, more complex legislative package.
Why This Matters: Equal Access to CITs for 403(b) Plans
Allowing 403(b) plans to invest in CITs is a crucial step in modernizing and broadening the types of investment options in the retirement savings landscape. CITs offer a more cost-effective and operationally efficient option compared to traditional mutual funds, which can result in lower fees and better net returns for participants. This legislation would help align 403(b) plans with 401(k), 457(b), and other retirement savings plans, ensuring a more equitable retirement savings environment for all participants, regardless of the technical tax code distinctions under which a retirement plan operates.
Next Steps: Pushing Toward Passage
With the introduction of this capital markets bill, the CIT expansion for 403(b) plans has the greater potential to be approved as part of a broader legislative effort. Clear interest from key members of the Senate Banking Committee signals that the issue remains a priority.
As we approach the final months of the legislative year, Great Gray and other key advocates are committed to pushing this language forward in one of the must-pass legislative vehicles expected to come before Congress. Our goal remains the same: ensuring that 403(b) plan participants have equal access to CITs, leveling the playing field with 401(k) and other retirement plans by expanding the investment options for 403(b) plans.
Great Gray’s Commitment
At Great Gray Trust Company, we continue to monitor these developments closely. Our commitment to advocating for a more equitable retirement landscape remains unwavering. We believe the inclusion of CITs in 403(b) plans will provide plan participants with access to more cost-effective and efficient investment options, which could significantly enhance their long-term retirement outcomes. As the conversation around this legislation continues, we encourage all stakeholders—retirement plan sponsors, fiduciaries, and participants—to stay engaged and vocal in support of these changes. Your advocacy will be critical in ensuring that this important provision makes it through the legislative process in the months ahead.
Conclusion: Keeping the Momentum Alive
The inclusion of 403(b) CIT language in the broader Empowering Main Street in America Act is a promising sign that momentum for this legislation is still strong. While the broader package is partisan, the bipartisan commitment to expanding CIT access remains evident. Great Gray Trust Company will continue to support these efforts and provide updates as the legislative process unfolds.
We’ll continue to provide updates as we work together to push for this important change, ensuring a more equitable and effective retirement savings system for all.
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