A SECURE 2.0 “fix” that would allow 403(b)s to invest in collective investment trusts (CIT) was officially introduced in the House on May 2.
The bill, The Retirement Fairness for Charities and Educational Institutions Act of 2023, introduced by House Financial Services Committee Member Rep. Frank D. Lucas, (R-OK), would amend federal securities laws to enhance 403(b) annuity plans in part by adding a CIT option.
“The introduction of this bipartisan bill by senior members of the House Financial Services Committee is a good first step towards addressing this 403(b) plan investment inequity,” Andrew Remo, ARA’s Director of Federal and State Legislative Affairs, said. “We expect the Committee to take up and pass this measure along to the full House of Representatives in the coming weeks.”
The House version of what became the SECURE 2.0 Act of 2022 included CIT/403(b) provisions — but only part of that solution made it into the final bill.
American Retirement (ARA) CEO Brian Graff said that Congress didn’t have the bandwidth to settle the issue before SECURE 2.0 was enacted in December 2022.
He explained that there were two sticking points, a taxation portion and a financial services portion. Graff and the ARA were instrumental in informing members about and getting them to agree on the taxation portion of the issue as SECURE 2.0 developed, freeing Congress to then focus on the financial services aspect, which the Lucas bill now does.
Proponents argue that CITs typically have lower expenses when compared with their mutual fund counterparts due to lower administrative and regulatory requirements. Their structure also provides greater customization flexibility to accommodate a particular plan’s needs.
It’s a particular issue with 403(b)s, in which plan participants of non-profit organizations — like public schools, universities, churches, and charities — might find themselves subject to fees and expenses higher than CITs might provide, something the new legislation is meant, in part, to address.