House Advances Bill Allowing 403(b) Plans to Invest in CITs

The House of Representatives passed Wednesday, by a 295 to 128 vote, a bill to permit the use of collective investment trusts in 403(b) plans.

The bipartisan measure, H.R. 1013, known as the Retirement Fairness for Charities and Educational Institutions Act, would amend federal securities laws to permit eligible 403(b) plans to access collective investment trusts.

The bill completes, in the House, work begun in the SECURE 2.0 Act of 2022, which removed tax-law barriers that had prevented 403(b) custodial accounts from investing through CITs. However, Congress had not simultaneously updated securities laws, leaving most 403(b) plans unable to utilize the investment vehicles, despite the statutory changes. This bill addresses that disconnect by amending the appropriate securities laws.

The bill was sponsored by Representatives Frank Lucas, R-Oklahoma, and Josh Gottheimer, D-New Jersey. Supporters argue the bill would eliminate a longstanding disparity that has prevented 403(b) plan participants from accessing investment products that are widely available in the private sector defined contribution market.

CITs surpassed mutual funds as the most popular investment vehicle used to offer target-date funds in 2024. On average, CITs charge lower fees than do mutual funds, and are only available to institutional investors, not to retail investors.

Unlike mutual funds, CITs are regulated as bank products, not as securities, and are therefore not regulated by the Securities and Exchange Commission. Instead, CITs are regulated by state and federal banking regulators. Depending on the charter of the issuing bank, that can be either the federal Office of the Comptroller of the Currency or state bank examiners, along with the Internal Revenue Service.

Critics, including Representatives Maxine Waters, D-California, and Stephen Lynch, D-Massachusetts, argue that there is a lack of federal oversight, especially in 403(b) plans not subject to the fiduciary protections of the Employee Retirement Income Security Act. Lynch, speaking during floor debate on the bill, characterized it as something to benefit investment and insurance companies.

Supporters said lower-cost investment access would benefit workers. Others have noted that the bill would not require 403(b) plans to offer CITs and that plan sponsors would have full discretion over what investment products to offer.

“This is a good bill for workers. Teachers, nurses, hospital staff and nonprofit employees save for retirement in 403(b) plans, and for years they have been shut out of the lower-cost investment options that 401(k) participants take for granted,” said former Assistant Secretary of Labor Lisa Gomez, in a LinkedIn post before the vote. “Lower fees mean more of every paycheck contribution stays in the worker’s account and compounds over a career. That is real money in people’s pockets at retirement.”

Gomez headed the Department of Labor’s Employee Benefits Security Administration during President Joe Biden’s presidency.

Firms such as T. Rowe Price, Vanguard, Fidelity, BlackRock, State Street Investment Management and Capital Group already have significant CIT offerings in the defined-contribution market and could see broader distribution opportunities if 403(b) plans choose to use the investment vehicles. Federal law already allows 401(k) plans, 457(b) plans and the federal Thrift Savings Plan to utilize CITs.

The Investment Company Institute, the Investment Adviser Association and the Insured Retirement Institute, all of which supported the measure across several Congresses, applauded its passage and urged quick passage of the companion measure in the Senate.

“ICI applauds the House of Representatives for its passage of the bipartisan Retirement Fairness for Charities and Educational Institutions Act. Nurses, teachers, and nonprofit workers should have the same opportunities for a secure financial future and retirement that private sector employees enjoy. This bill accomplishes that goal,” the ICI said in a statement.

Karen Barr, president and CEO of the IAA, said in a statement after the House vote, “We applaud the bipartisan support for this commonsense legislation and urge the Senate to follow suit.”

Senators Katie Britt, R-Alabama, and Raphael Warnock, D-Georgia, introduced the Senate version of the bill in 2025. That bill has 20 co-sponsors and was referred to the Committee on Banking, Housing, and Urban Affairs early that year. In 2024, Senator Tim Scott, R-South Carolina, introduced a broader bill that included the necessary securities law changes.

In July, some 30 retirement industry CEOs signed a joint letter to the Senate committee urging the senators to pass a bill to allow CITs to be used in 403(b) plans.