Industry Anticipates SEC Approval of Dual Share Class ETF Offerings

The Securities and Exchange Commission in March said it was prioritizing its review of applications for firms aiming to offer ETF share classes of its traditional mutual funds.

Most exchange traded fund issuers say they expect active and passive mutual funds adding ETF share classes to be approved and 93% of standing applicants have requested exemptive relief for dual-share-class structure in their filings through December 2024, according to the inaugural edition of Cerulli Edge—U.S. Product Development Edition.

The Securities and Exchange Commission in March said it was prioritizing its review of applications for firms aiming to offer ETF share classes of its traditional mutual funds. Some fifty applications for such relief have been waiting approval for up to two years.

According to Cerulli, 69% of polled ETF issuers said they either already have filed exemptive relief applications (29%), are planning to file for exemptive relief at a later date (11%), or are considering a dual-share-class structure initiative and following developments (29%).

“SEC filings from various applicants … list advantages including ‘lower portfolio transaction costs,’ ‘greater tax efficiency,’ and an ‘additional distribution channel for asset growth and economies of scale’ when it comes to ETF share classes on mutual funds, as well as ‘efficient portfolio rebalancing’ and ‘greater basket flexibility’ for mutual fund classes on ETFs,” wrote Cerulli analyst Sally Jin in the firm’s recent report on the topic. “Other asserted arguments for the dual-share-class structure point to initiatives in place that reap similar benefits—including cloning mutual fund strategies into ETFs and mutual-fund-to-ETF conversions—that simultaneously respond to investor demand and raise fiduciary challenges that the dual-share-class structure could be better fit to take on.”

Vanguard has been the sole manager able to offer a multi-class share structure under a patent that expired in mid-2023. Other ETF issuers are now seeking to replicate the structure through exemptive relief from the SEC. Asset managers including Charles Schwab, Fidelity, Dimensional Fund Advisors and BlackRock have filed for similar exemptive relief.

In a speech earlier this year at the Investment Company Institute’s 2025 investment management conference, then-acting SEC Chair Mark Uyeda said that ETF market growth over the last twenty years has demonstrated how experimentation can work in asset management. As ETFs now account some 30% of total industry assets, Uyeda said managers should be encouraged to continue improving.

Previously, the SEC has  pointed to concerns, including excessive leverage, conflicts of interest, investor confusion, the risk of cross-subsidization, cash redemption and fund expense payment discrepancies, and inequitable voting power, when questioning dual-share-class ETFs, according the Cerulli findings.

On the distribution side, the survey found that ETF managers cite “broker/dealer reluctance to approve/make ETF share classes available on [broker/dealer] platforms (54%), operational complexity of supporting mutual fund and ETF share classes (43%), and asset manager unwillingness to offer ETF transparency to mutual fund strategies (29%)” as impediments to the adoption of dual-share class funds.

Senate Bills Aim to Clarify Social Security Terminology, Statements

The number of pending Social Security claims for retirement, survivor and health insurance has dramatically increased this year.

A group of senators have reintroduced bipartisan legislation that would change the Social Security Administration’s terminology to offer clarity for retirees deciding when to retire and require mailed statements be sent detailing their contributions.

One bill would change the Social Security Administration’s terminology from “early eligibility age,” “full retirement age” and “delayed retirement credits” to “minimum monthly benefit age,” “standard monthly benefit age” and “maximum monthly benefit age,” respectively, to “better reflect Social Security’s claiming design and how the program works,” according to an April 29 news release.

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The bill was introduced by Senator Bill Cassidy, R-Louisiana, chairman of the Senate Committee on Health, Education, Labor and Pensions, and co-sponsored by Senators Susan Collins, R-Maine; Chris Coons, D-Delaware; and Tim Kaine, D-Virginia. According to the senators, the changed language would offer more clarity to retirees who receive maximum benefits if they wait until age 70 to claim their benefits.

“Americans have earned their benefits,” Cassidy said in a statement. “When planning for retirement, let’s make sure they have the best information available and receive what they deserve.”

A separate bill introduced by the same group of senators would require the SSA to mail earnings statements to help Americans plan for retirement. Under the proposal, individuals with Social Security accounts would see how much they paid into Social Security every five years between ages 25 and 54, every two years from 55 to 59, and annually at 60 and older.

Both bills have been referred to the Senate Committee on Finance, from which the legislation did not advance in the previous Congress.

Increase in Retirement, Survivor, Health Claims

Americans can claim Social Security benefits as early as age 62, but the benefits paid out will be larger for those who wait, with maximum benefits available to those who claim at age 70.

In 2023, about 23% of retirees claimed Social Security at age 62, while 59% of people aged 63 to 66 claimed benefits, and only 9% claimed at age 70 or later, according to data from the Social Security Administration.

Meanwhile, the number of pending Social Security claims for retirement, survivor and health insurance has dramatically increased this year.

In April, pending claims reached 614,158, according to the SSA’s April 25 up from 460,158 claims one year ago. April’s figure also outpaced the 580,887 claims made in March, resulting in an additional 250,000 applications for benefits compared with last year, according to the report.

“The way that it works is: Generally, the longer you wait, the more you can get,” says Romi Savova, the founder and CEO of PensionBee, a personal pension provider. “So the question is: Why are people tapping into Social Security? Is it because they need those funds?”

Social Security has long been a third-rail political issue and one of the few federal programs not likely to receive cuts as Congressional Republicans finalize their budget resolution. The Social Security Administration announced in March that it would need to cut at least 7,000 employees from the agency and close multiple regional offices to comply with executive orders from President Donald Trump.

In fact, Trump has floated the idea of ending taxes on Social Security, which would likely accelerate the depletion of the combined Social Security trust funds, which are currently forecast to run out and require benefit cuts by 2035.

A recent PensionBee study found that Americans could need an extra $100,000 in retirement savings to make up a shortfall in Social Security benefits, which are expected to fall 17% if the fund is depleted in 2035.

Raising the retirement age or reducing benefits are two potential, yet very unpopular, solutions to solve the funding conundrum, says Dennis Jansen, head of economics at Texas A&M University.

“Benefits are too high,” he says. “We promised more than we can pay.”

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