Vanguard\u2019s latest report makes a blunt point: allowing collective investment trusts (CITs) in 403(b) plans could save the median plan participant about 0.08% to 0.09% annually compared to mutual fund fees\u2014translating into $23,000\u2013$28,000 less paid in fees by age 65 for someone earning $74,000 a year. That\u2019s enough to cover six months of living expenses in retirement for one person.<\/p>\n
Here\u2019s the kicker: 10 million educators, healthcare workers, and nonprofit employees are left behind by plan regulations barring CIT access in most 403(b)s. Meanwhile, their private-sector counterparts in 401(k) plans enjoy lower-cost, institutional-tier investment options.<\/p>\n
Why It Matters\u2014and Fast<\/strong><\/p>\n CITs aren\u2019t gimmicks. They\u2019re institutional investment vehicles regulated by OCC and state banking authorities, not the SEC\u2014so they sidestep much of the retail marketing and disclosure regime. That makes CITs cheaper to run and easier to customize for large plan groups.<\/p>\n Since August\u202f2024, CITs have even surpassed mutual funds in target-date fund assets. Yet many 403(b) plans remain frozen in time. This isn\u2019t a small oversight\u2014it\u2019s a systemic inequity that costs participants real dollars over decades.<\/p>\n Legislative Progress\u2014but Still No Access<\/strong><\/p>\n The SECURE\u202f2.0 Act tweaked tax law to permit CITs in 403(b)s, but securities law wasn\u2019t updated, so most plans still can\u2019t offer them. Recently, legislation\u2014H.R.\u202f1013, the Retirement Fairness for Charities and Educational Institutions Act\u2014advanced from committee on a bipartisan 43\u20138 vote to bridge that gap.<\/p>\n One proposed amendment to restrict CITs only to ERISA-covered 403(b)s was defeated. That means potential access expands\u2014not contracts\u2014and that\u2019s vital because ERISA fiduciary standards apply regardless of plan tax status .<\/p>\n Fiduciaries, Don\u2019t Sleep on This<\/strong><\/p>\n If you oversee a 403(b) plan today, you have options\u2014but you still can\u2019t offer CITs until the law changes. That means it\u2019s incumbent on plan sponsors and advisors to engage lawmakers and support reform\u2014both for compliance and participant benefit.<\/p>\n Even small fee differences can compound into substantial retirement savings. The longer this disparity persists, the more nonprofit workers pay\u2014and the more they lose out on potential compounding. That\u2019s not accidental\u2014it\u2019s a fiduciary blind spot worth fixing.<\/p>\n Bottom Line<\/strong><\/p>\n This is not theory. It\u2019s not a cost-savings calculator exercise. It\u2019s real dollars that could be preserved for teachers, nurses, public school employees, and nonprofit staff for decades to come. If you\u2019re serious about fiduciary duty\u2014not just compliance\u2014you need to be part of the solution.<\/p>\n Because when a quarter-percent difference translates into six months of income in retirement, it\u2019s not small\u2014it\u2019s meaningful. And waiting is not an option.<\/p>\n <\/span><\/p>","protected":false},"excerpt":{"rendered":" Vanguard\u2019s latest report makes a blunt point: allowing collective investment trusts (CITs) in 403(b) plans could save the median plan participant about 0.08% to 0.09% annually compared to mutual fund fees\u2014translating into $23,000\u2013$28,000 less paid in fees by age 65 … Continue reading