House Financial Services Committee wants input on 403(b) CIT access

After a hearing on Wednesday, the U.S. House Financial Services Committee’s subcommittee on capital markets is seeking input on various legislative proposals to enhance investor access to private markets and support capital formation. One notable proposal under consideration is the potential inclusion of collective investment trusts (CITs) as an investment option for 403(b) plans. The committee is particularly interested in examining whether private asset classes should be more accessible to individuals holding defined contribution plans.

The hearing, titled “The Future of American Capital,” was conducted by Subcommittee Chair Ann Wagner, R-Missouri, to evaluate the role of capital formation in fostering economic growth. Among the bills scrutinized by the committee is the Retirement Fairness for Charities and Educational Institutions Act, which aims to amend the Exchange Act and allow 403(b) plans to invest in unregistered insurance contracts and CITs, similar to those already utilized by 401(k) plans for their investment selections. The same legislation was reintroduced in both the House and Senate recently.

The SECURE 2.0 Act of 2022 made amendments to Internal Revenue Code Section 403(b) to enable 403(b) plans with custodial accounts to invest in CITs. However, for CITs to become a viable investment for 403(b) plans, modifications are also needed in securities laws. Chris Spence, the managing director of federal government relations at TIAA, urged the committee to broaden nonprofit employees’ access to CIT investments, advocating for equal opportunities for retirement savings between public sector employees and those in the for-profit industry.

The committee’s call for feedback extends to an array of questions concerning investor access to private markets and participation. Inquiring about retirement investment options, the committee poses the question of whether 401(k)s and other retirement vehicles should have increased access to private markets and the necessary safeguards to ensure their security. Additionally, concerns were raised about the restrictive definition of accredited investors, typically individuals earning at least $200,000 annually, as stipulated by the Securities and Exchange Commission. Addressing these limitations, Wagner emphasized the importance of broadening investment opportunities to a wider pool of investors beyond the confines of the current accredited investor definition.

Interested parties wishing to contribute feedback can do so by submitting their comments and responses to the questions specified in the committee’s press release to [email protected] by March 31. The complete hearing can be observed online for additional insight into the matters discussed.