Are CITs Now Permitted in 403(b) Plans?

Q: In a recent Ask the Experts column, you indicated that the since-passed SECURE 2.0 Act of 2022 legislation might allow collective investment trusts (CITs) in 403(b) plans. Are CITs now permitted?

Kimberly Boberg, Taylor Costanzo, Kelly Geloneck and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: No, but we’re getting closer! The SECURE 2.0 Act amended Internal Revenue Code Section 403(b) to allow 403(b) plans with custodial accounts to invest in CITs. However, in order for CITs to be a permissible investment for 403(b) plans, securities law needs to be amended. A prior version of the legislation did contain the necessary securities law amendments, but the proper congressional committee was not consulted regarding such changes, and that committee expressed some reservations about allowing CITs in 403(b) plans. As a result, the final version of SECURE 2.0 did not contain any reference to securities law in its CIT provision. Thus, for the moment, CITs are still not a reality for 403(b) plans (with the exception of 403(b)(9) church plan retirement income accounts, which permitted CITs under the prior law).

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.