Legislation to Modernize 403(b) Retirement Plan Investment Options (Joint Trades)

Summary

SIFMA and Other Joint Trades write to the Senate Committee on Banking, Housing, & Urban Affairs in strong support of legislation to modernize federal securities regulation of 403(b) retirement plan investments by providing parity with other retirement savings arrangements, including 401(k) plans, that already have access to low-cost collective investment trusts (CITs) and non-registered insurance company separate accounts.

Excerpt

More than 10 million Americans participating in 403(b) plans — including teachers, healthcare workers, nonprofit employees, and charitable organization staff — continue to face outdated federal securities law barriers that prevent access to the same low-cost institutional investment and protected lifetime income solutions available in 401(k) plans, governmental 457(b) plans, and the federal Thrift Savings Plan. In fact, CITs now account for 37 percent of the assets in 401(k) plans, demonstrating their utility and cost efficiency.

Congress recognized this inequity in SECURE 2.0 by addressing the necessary tax code changes. However, without corresponding amendments to federal securities laws, 403(b) participants remain unable to fully benefit from those reforms. The Retirement Fairness for Charities and Educational Institutions Act (S.424/H.R.1310), included in the Empowering Main Street in America Act of 2024 (S.5139) as well as House-passed INVEST Act of 2025 (H.R.3383), would complete this important bipartisan effort to modernize federal securities law treatment of 403(b) plans.

Importantly, the legislation preserves strong investor protections. The bill limits these investment options to employer-sponsored retirement plans overseen by plan fiduciaries, a state or local government, or an employer agreeing to take on fiduciary status and does not alter the SEC’s enforcement authority or broader securities law protections applicable to retirement savers. In addition, CITs and non-registered insurance company separate accounts are subject to strong regulatory oversight by the Office of the Comptroller of the Currency (OCC), the Department of Labor, and state banking and insurance regulatory bodies.

Enactment of this legislation would expand access to cost-efficient investment options, strengthen opportunities to incorporate lifetime income solutions into 403(b) plans, and help improve retirement security outcomes for millions of Americans serving in the education, healthcare, charitable, and nonprofit sectors.