ABA supports bipartisan bill to expand 403(b) investment

The American Bankers Association sent a letter today to Reps. Frank Lucas (R-Okla.), Bill Foster (D-Ill.), Josh Gottheimer (D-N.J.) and Andy Barr (R-Ky.) in support of legislation they introduced earlier this month to amend the Exchange Act to allow 403(b) retirement plans—which are offered by public schools, hospitals and certain charities—to invest in unregistered insurance contracts and collective investment trusts that currently may be invested in by comparable retirement plans, such as 401(k) plans.

H.R. 3063, the Retirement Fairness for Charities and Education Institutions Act of 2023, “would level the playing field,” ABA wrote, adding that given CITs’ “significant benefits” for retirement investing, “we believe that CITs should be made available without restriction to 403(b) plans in the same manner as traditional pension and 401(k) plans.”

According to ABA, most CITs include daily valuations and trade processing and are offered in a wide range of asset classes—including domestic equity, international equity, domestic fixed income, international fixed income, stock/bond blend, target date funds and short-term investment funds. Retirement plan sponsors and their recordkeepers increasingly invest through these customized investment options because CITs are cost effective and offer more investment options for 401(k) plans, ABA wrote.

Banks’ CITs are regulated under federal and state banking laws and subject to examination and oversight by federal and state banking regulators and must comply with federal tax laws that limit the eligible investors to U.S. tax-qualified retirement plans and U.S. governmental retirement plans.