The House of Representatives has passed a bill that includes a provision allowing 403(b) plans to include collective investment trusts (CITs) in their investment lineups. The bill will move to the Senate, where, if passed, it is expected to be signed by President Trump.
SECURE 2.0 included a provision to allow CITs in 403(b) plans, but securities laws needed to be changed for the rule to take effect. The securities law change has been proposed for several years, and its enactment is overdue.
CITs are regulated differently from SEC-regulated mutual funds and, as a result, often have a lower expense ratio. CIT plans have long been allowed in 401(k) plans. There has been an ongoing pattern of consistency in the regulation of 401(k) and 403(b) plans, and allowing CITs in all plans is consistent with that trend.
Industry groups, recordkeepers, insurance companies, and investment managers have broadly supported this change. Much of the recent innovations in investment products for retirement plans utilize CITs as the investment vehicle, notably target date series, which include lifetime income or private equity. This change would open up the 403(b) market to these types of investments.
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