Movement on the issue of allowing 403(b)s to use collective investment trusts (CIT) could happen soon with a possible House vote on the Retirement Fairness for Charities and Educational Institutions Act, an amendment to H.R. 2799, Expanding Access to Capital Act of 2023.
The bill had been scheduled for a possible vote on March 6; however, H.R. 2799, and the amendment, were left as unfinished business at the end of the day. 
The amendment would enable 403(b) retirement savings plans to use CITs and unregistered insurance company separate accounts, which was left out of SECURE 2.0.
Reps. Josh Gottheimer, D-N.J., Bill Foster D-Ill. and Frank Lucas, R-Okla., sent a “Dear Colleague” notice to members late March 5, asking them to vote to support the amendment.
What the Legislation Would Do. Currently, 403(b) plan participants do not have the same access to the variety of investment options that are available to savers using other plans, including 401(k) plans, 457(b) plans, and the federal Thrift Savings Plan. If passed, the representatives said it would ensure that 403(b) plan participants have the same opportunities to invest as other retirement plan participants.
Unlike mutual funds or ETFs—which must register with the Securities and Exchange Commission (SEC)—CITs are regulated under the Office of the Comptroller of the Currency (OCC), a federal banking agency in the U.S. Treasury Department and state banking regulators.
About CITs. Since CITs are exempt from SEC registration requirements, they typically have lower fees than mutual funds. CITs, which are not retail products, also typically have lower administration, marketing, and distribution costs than retail products like mutual funds.
These features often result in cost savings for the CIT, which are then passed on to plan sponsors and participants. CITs are only offered to institutional investors, like sponsors of retirement plans. CITs are widely available and increasingly popular in 401(k) plans.
A Change of Approach. Historically, 403(b) plan investments have been limited by law. When 403(b) plans were codified by Congress in 1958, 403(b) plans were limited solely to investments in annuities. Congress first allowed 403(b) plans to invest in mutual funds in 1974.
Four years later, Congress established the 401(k) plan, used primarily by the private sector, with significantly fewer investment restrictions. These investments would only be available where there is an institutional plan sponsor overseeing the 403(b) investments, as is the case in other retirement plans.
“Today, there is no rational basis why CITs are not available in 403(b) plans and accessible to teachers, hospital workers, charity and non-profit employees,” the notice read.
It argued that collective investment trusts in 401(k) and 401(a) plans have grown dramatically in recent years.
“Congress passed necessary changes to the tax code that would allow 403(b) plans to invest in CITs and unregistered insurance company separate accounts as part of SECURE 2.0 in 2022. This amendment would make corresponding changes to the securities laws that would allow 403(b) plans to invest in these low-cost investment options.”
The “rule” for debating H.R. 2799, along with the amendment list, can be FOUND HERE. The 403(b) amendment is listed as No. 3 in order.
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