A new bipartisan effort to expand investment options for public and nonprofit employees is gaining momentum in Congress. Lawmakers have reintroduced legislation that would allow collective investment trusts (CITs) to be included in 403(b) retirement plans, marking another step toward modernizing investment choices for millions of workers in the nonprofit and education sectors.

The proposed Retirement Fairness for Charities and Education Institutions Act of 2025 aims to align 403(b) plans with 401(k) plans by granting access to lower-cost, institutionally managed CITs. The bills—H.R. 1013 in the House and S. 424 in the Senate—have received strong bipartisan backing, reflecting broad support for improving the retirement landscape for teachers, hospital workers, and nonprofit employees.

Why CITs Matter: Lower Costs and Institutional-Grade Management

Currently, only 401(k), 457(b), and federal Thrift Savings Plans (TSPs) can offer CITs due to specific registration exemptions under federal securities laws. CITs, which are pooled investment vehicles similar to mutual funds but with lower costs and greater flexibility, are widely used in 401(k) plans to enhance long-term retirement savings.

While the SECURE 2.0 Act amended tax laws to permit 403(b) plans with custodial accounts to include CITs, a securities law change is still required before the option becomes fully available. If the new legislation passes, it would enable 15 million public sector and nonprofit employees to benefit from CITs, providing access to:

· Lower fees compared to traditional mutual funds

· Institutionally managed investments with enhanced oversight

· Greater diversification to improve retirement outcomes

· Increased flexibility for plan sponsors in designing investment options

Supporters argue that this change would help level the playing field for 403(b) participants, who have historically had fewer investment choices compared to their 401(k) counterparts.

Strong Industry and Advocacy Support

The push to expand CITs into 403(b) plans has gained widespread backing from industry groups and retirement advocates, including the Investment Company Institute (ICI) and the American Retirement Association. These organizations emphasize that providing more cost-effective investment options is critical to enhancing retirement security, particularly for educators, healthcare professionals, and nonprofit workers who rely on 403(b) plans.

Congressional proponents of the bill argue that modernizing 403(b) plans is essential as more Americans rely on employer-sponsored retirement accounts to build their financial future. Given the significant cost advantages of CITs, proponents hope that legislative approval will encourage broader adoption and improve retirement savings outcomes.

What’s Next? Legislative Outlook for 2025

As Congress revisits this issue, supporters are advocating for swift passage to ensure that 403(b) plan participants can access the same investment tools as other retirement savers. While bipartisan cooperation is a promising sign, the bills will need to advance through committee reviews and floor votes in both chambers before becoming law.

If passed, the Retirement Fairness for Charities and Education Institutions Act of 2025 would mark a major step forward in making retirement savings more accessible and cost-effective for millions of Americans. Industry experts will be closely watching legislative developments in the coming months as lawmakers work to finalize the details of this much-anticipated change.

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