chart with 403(b) word on it It’s noteworthy that 403(b) plans were legislated in 1958, predating 401(k)s by 20 years. At that time, annuities were the only allowable investment vehicles for 403(b) participants. The 1958 legislation codified what was a savvy savings practice by a few charitable organizations into a tax law available for all nonprofit employees. (Photo: Shutterstock)

The House Financial Services Committee passed legislation that would allow employees of nonprofit charities and public education institutions in 403(b) plans to have access to the same investment options available to employees of for-profit companies and other employers in 401(k) plans.

Sponsored by Rep. Frank Lucas, the “Retirement Fairness for Charities and Educational Institutions Act of 2023” paves the way for 403(b) plans to offer collective investment trusts (CITs) as an investment option to plan participants. CITs are tax-exempt, pooled investment vehicles maintained by a bank or trust company exclusively for qualified plans, including 401(k)s, and certain types of government plans. CITs are often a lower-cost option because they have fewer administrative and regulatory requirements. A recent report by Morningstar predicts CITs will overtake mutual funds as the most popular target-date vehicle in the next 2 years.

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