House OKs bill to let 403(b) plans invest in collective trusts 

Bipartisan legislation to change securities laws so 403(b) plans can offer collective investment trusts (CITs) passed the House on Dec. 11 as part of a larger package of capital market reforms (HR 3383). The CIT-related changes appear in a section entitled Retirement Fairness for Charities and Educational Institutions. The outlook for companion Senate legislation (S 424) is uncertain, but supporters hope the changes might pass Congress sometime in 2026.

Widely used by 401(k) plans, CITs are a type of pooled investment vehicle similar to mutual funds. Before enactment of the SECURE 2.0 Act of 2022 (Div. T of Pub. L. No. 117-328), neither the Internal Revenue Code (IRC) nor federal securities laws allowed 403(b) custodial accounts to offer CITs. The SECURE 2.0 Act amended the tax law, but Congress couldn’t agree on the changes to federal securities laws, so CITs are still unavailable to 403(b) plans for the time being.

The legislation would specifically amend relevant securities laws to permit the following types of 403(b) plans to invest in CITs:

• Plans subject to Title I of ERISA
• Governmental plans in which a plan fiduciary, employer or person acting on behalf of the employer reviews and approves each investment offering
• Plans sponsored by an employer that has agreed to serve as a fiduciary for selecting the plan’s investments

The bill would make similar securities law changes for 403(b) plan investments in unregistered insurance company separate accounts. However, the IRC’s investment restrictions for 403(b) custodial accounts would remain in place.

• Increasing Investor Opportunities Act, Section 202 (Congress, Dec. 2, 2025)
• Div. T of Pub. L. No. 117-328, SECURE 2.0 Act (Congress, Dec. 29, 2022)

• User's guide to SECURE 2.0 (updated regularly)
• New bills would allow 403(b) plans to invest in collective trusts (March 3, 2025)
• Viewing SECURE 2.0 through a 403(b) lens (May 22, 2023)