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        Congressional Action Needed for 403(b) Plan Investment Options Improvement

        Melissa Kahn, Esq.
        Retirement Public Policy Strategist

        Issue

        With the enactment of SECURE 2.0, Congress took a major step forward in removing tax law impediments to the inclusion of Collective Investment Trusts (CITs) as investment options in 403(b) plans, but further changes are necessary to enable 403(b) plan sponsors and participants to realize the same CIT benefits currently available to 401(k) plan sponsors and participants. The Retirement Fairness for Charities and Educational Institutions Act of 2023 (H.R. 3063), currently pending in Congress, is intended to ensure that 403(b) plan sponsors and participants have the same investment opportunities as those available to 401(k) plans. However, Members of Congress need to hear from the 403(b) plan and service provider community on the importance of this legislation.

        Background

        Collective Investment Trusts have grown in popularity with 401(k) plan sponsors and participants due to their ability to offer investment opportunities at lower costs than many other investment options. While similar to 401(k) plans, 403(b) plans were foreclosed, as a practical matter, from utilizing CITs due to required compliance with provisions of the Internal Revenue Code and securities laws, for which 401(k) plans enjoyed exemptions. Congress addressed the tax law impediments as part of SECURE 2.0, but failed, primarily due to jurisdictional issues, to provide needed exemptions from the securities laws; exemptions which are necessary to providing lower costs and investment flexibility to 403(b) plans. H.R. 3063 would provide the securities law exemptions necessary to level the playing field for 403(b) plan sponsors and participants.

        We commend the sponsors of H.R. 3063 for their efforts to address this important issue and expand low cost investment opportunities for employees of charitable and educational institutions. We encourage your support. You may access the specifics of H.R. 3063 via the following link: BILLS-118hr3063ih.pdf (congress.gov).

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