Last month, the House Committee on Financial Services advanced the Retirement Fairness for Charities and Educational Institutions Act of 2025, which provides a “level playing field” between participants of 401(k)s and 403(b)s, said Rep. Frank Lucas. The bill would allow low-cost collective investment trusts (CITs) in 403(b) plans. The bill was the latest attempt to pass CIT legislation after Congress was unable to enact previous versions of this bill.
There have been prior attempts by Congress to pass similar CIT legislation, which follows unfinished business left over from the enactment of SECURE 2.0 in 2022, which amended the Internal Revenue Code to allow 403(b)s to invest in CITs, but changes needed under the securities law did not make it into the final bill when SECURE 2.0 was enacted.
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Now, the National Association of Government Defined Contribution Administrators (NAGDCA) is applauding the House bill that would benefit the nation’s 15 million teachers, hospital workers, and nonprofit employees. “We heartily applaud Representative Frank Lucas and the House Committee on Financial Services for introducing and advancing this important bill,” stated NAGDCA Executive Director Matt Petersen.
NAGDCA, which is a professional association for plan administrators and services providers of government-sponsored defined contribution retirement plans, has been a long-time proponent of including CITs in 403(b) plans, “given their lower-cost basis than that of mutual funds and annuities. Under current law, CITs “are permitted in private sector 401(k) plans and all other defined contribution retirement plans other than governmental 403(b) plans,” said Petersen.
CITs are tax-exempt, pooled investment vehicles similar to mutual funds that are maintained by a bank or trust company exclusively for qualified plans, including 401(k)s and certain types of government plans. CITs and mutual funds account for 47% of all target-date strategy assets as of year-end 2022, according to Morningstar, which predicts CITs are on pace to overtake mutual funds as the most popular target-date vehicle in the next two years.
“For too long, retirement options have unfairly disadvantaged public servants. While the required changes to our tax code for 403 (b) retirement plans have already been made, we now need to implement the necessary changes to securities law,” said Congressman Lucas, who sponsored the bill. “This bipartisan bill aims to do exactly that and will allow for much needed consistency across retirement plans. Hardworking Americans deserve solutions like this to see their retirement savings thrive.”
In February, the Senate introduced a similar bill, the Retirement Fairness for Charities and Educational Institutions Act of 2025, which would allow 403(b) plans to include CITs as part of their investment menu options. The Investment Company Institute applauded this Senate bill, stating that 403(b) plans are an important component of the U.S. retirement system with $1.4 trillion in assets.
Last year, Senate Banking, Housing and Urban Affairs Committee member Sen. Tim Scott (R-SC) also introduced the Empowering Main Street in America Act of 2024 to expand 403(b) plan participants' investment options, so they have greater parity with those available in 401(k)s and other plans. But shortly after, six investor advocacy groups opposed CITs in 403(b)s because some plans are not governed by ERISA, so eliminating SEC’s regulatory oversight is detrimental, in a letter sent to the Senate committee.
Related: House advances bill allowing low-cost collective investment trusts in 403(b) plans
Governmental workers “deserve access to all options to help these retirement savings grow as much as possible. CITs offer a sound investment for public sector employees and we thank you for advancing this important legislation,” said Peterson.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
