CITs are tax-exempt, pooled investment vehicles similar to mutual funds that are maintained by a bank or trust company exclusively for qualified plans, including 401(k)s and certain types of government plans. CITs and mutual funds account for 47% of all target-date strategy assets as of year-end 2022, according to Morningstar, which predicts CITs are on pace to overtake mutual funds as the most popular target-date vehicle in the next two years.

Sen. Scott introduced the Empowering Main Street in America Act of 2024, which would expand 403(b) plan participants' investment options, so they have greater parity with those available in 401(k)s and other plans. The legislation follows unfinished business left over from the enactment of SECURE 2.0. In March, the House approved the Retirement Fairness for Charities and Educational Institutions Act to allow CITs in 403(b) plans. Also, a separate bill that would allow 401(b)s to include CITs was introduced in August by a bipartisan group of senators.

Consultants and advisors support the transition from target date funds provided through mutual funds to CITs, which is primarily due to CIT's cost-effective fee structures, according to T. Rowe Price. CITs are considered a bank product – not a security – so they can be cheaper and more flexible than mutual fund.

However, the investor advocacy groups – Americans for Financial Reform, Consumer Action, Consumer Federation of America, Institute for Agriculture and Trade Policy, Private Equity Stakeholder Project, and Public Citizen – sent a letter to the committee, expressing that they “strongly oppose” the Empowering Main Street in America Act of 2024, in their letter.

The legislation “would harm retail investors, damage market integrity, destroy capital, and hamstring the SEC’s and state securities regulators’ ability to carry out their missions. Far from benefiting Main Street, this bill would only increase risks and losses for those who can least afford it,” read the letter.

Now, the ARA is advocating for the passage of the House bill to make CITs available to nurses, educators and other nonprofit workers in their 403(b)s. On ARA’s newly launched advocacy page, the tagline reads “Let’s support those who support us: Make CITs available to educators and nonprofit workers.”

“There are 14.5 million teachers, nurses and non-profit employees who can’t take advantage of the retirement benefits that private sector workers receive through their 401k,” reads the content on ARA’s advocacy page. “But Congress has an opportunity to fix this by passing the Retirement Fairness for Charities and Educational Institutions Act. Tell Congress: Let’s take care of those who take care of us!”

Related: Senate Banking Committee urged to reject new bill allowing collective investment trusts in 403(b)s