Administration August 1, 2024

Bill to Allow CITs in 403(b) Plans Introduced in Senate

The introduction of the bill comes after a similar proposal was passed by the House of Representatives on March 8. 

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A bipartisan group of U.S. senators have introduced a bill that would allow 403(b) plans to include collective investment trusts, a generally lower-cost investment option available in other defined contribution plans, including 401(k)s.  

The bill, S. 4917, was introduced by Senator Katie Britt, R-Alabama, and co-sponsored by Senators Gary Peters, D-Michigan; Bill Cassidy, R-Louisiana; and Raphael Warnock, D-Georgia.  

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Since being introduced, the bill was read twice and referred to the Committee on Banking, Housing and Urban Affairs. The text of the bill has not yet been released publicly.  

Kendra Isaacson, a principal at public policy consultancy Mindset and a former counsel for the Senate Committee on Health, Education, Labor and Pensions, says she is hopeful the bill will pass and expects it to advance by the end of the year.  

“Participants in 403(b)s should enjoy the same low-cost options that participants in 401(k)s have,” she says. 

The introduction of the bill in the Senate follows the passage of a similar bill, the Retirement Fairness for Charities and Education Institutions Act, in the House of Representatives on March 8 as an amendment to H.R. 2799. That bill was passed easily by a vote of 301 to 125, and a section on the enhancement of 403(b) plans included language that would “amend federal securities laws to allow 403(b) plans to invest in CITs and insurance contracts that currently may be invested in by comparable retirement plans, such as 401(k)s.” 

The House bill was proposed by Representatives Frank Lucas, R-Oklahoma; Josh Gottheimer, D-New Jersey; and Bill Foster, D-Illinois. Lucas had argued that 403(b) plans, often used by nonprofits such as schools and charitable organizations, are at a disadvantage as compared with other DC plans because they do not have access to CITs. On March 11, the Senate received the House bill and referred it to the Committee on Banking, Housing and Urban Affairs. 

The SECURE 2.0 Act of 2022 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 laws need to be amended as well, according to Groom Law Group.  

Many in the retirement industry have pushed for allowing 403(b) plans to invest in CITs, as they can be cheaper and more flexible than mutual funds, in part because the instruments are not securities and do not need to be registered with the Securities and Exchange Commission. Instead, CITs are considered a bank product and regulated by the Office of the Comptroller of the Currency.  

CITs can also hold a larger percentage of illiquid assets, such as restricted private equity interests or commercial real estate assets, than can a mutual fund. This can make CITs more attractive to longer-term investors who do not need the daily valuations and redemptions available in mutual funds. 

Products August 1, 2024

Product & Service Launches

Morgan Stanley at Work launches new digital experience for benefits participants; Alight releases the latest version of its employee experience platform; Voya offers a new stable value solution; and more.

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Morgan Stanley at Work Introduces New ‘Digital Experience’  

The firm announced the launch of a website for benefits participants, with a focus on benefits education. The site is designed to help improve accessibility, foster clarity and reduce friction in understanding and navigating the resources employers provide. 

It includes: 

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  • Onboarding resources to welcome new workplace plan participants, walking through the specific benefits available to them; 
  • Pre-and post-login support to help participants find relevant information and explore additional Morgan Stanley services and offerings; and 
  • A comprehensive self-guided Learning Center with topic pages, filtering and search capabilities—for example, a “Navigate Change” topic page identifies content for key corporate events such as mergers and initial public offerings that can affect equity compensation. 

In addition, the site provides U.S.-based workplace benefits participants a “unified entry point” to equity compensation, retirement, deferred compensation, charitable giving and executive services, and leads to an authenticated platform for more personalized information about the participants’ specific plans. 

Alight Updates Employee Experience Platform 

Alight Inc. released its latest version of Alight Worklife, its employee experience platform, for 2024. The second release of the platform is dedicated to “increasing efficiency and automation, enhancing the user experience and enabling smarter benefits decisions” with the goal of empowering employers and their employees across their benefits offerings. 

Some of the key features of the new release include accelerated AI investments through new automation of spending account claims, which automates data extraction from claim receipts and images, as well as a “seamless” mobile reimbursement experience. It also offers a newly redesigned and integrated provider search experience, enabling employees to more easily search for health care providers who participate in their plans and meet their family’s needs. 

The release has more than 60 new features, according to the firm.  

Voya Launches New Stable Value Solution Suite 

Voya Financial Inc. announced the launch of its new stable value solution, the Voya Capital Preservation Fund, a bank collective investment trust with Great Gray Trust Company, LLC, as trustee and fiduciary authority.  

As the latest addition to Voya’s suite of stable value investment solutions, the fund is now available to Voya’s defined contribution plan participants in qualified 401(a), 401(k) and governmental 457(b) plans who are currently eligible to use stable value as an investment option. The fund is a bank CIT with a focus on providing participants in these plans with protection for their principal investment, according to Voya. 

In addition, the fund seeks to offer participants a “competitive yield, low return volatility and daily liquidity.” 

The fund is currently invested in a group annuity contract, which is a separate, actively managed account, and is issued by Voya Retirement Insurance and Annuity Company. Voya’s own asset manager, Voya Investment Management, has been hired by VRIAC to manage the assets of the separate account. 

“The launch of the Voya Capital Preservation Fund comes at the right time to take advantage of the current higher interest rate environment,” stated Chris Solimine, senior vice president and head of investment solutions at Voya Financial, in a press release.  

Schwab Launches its First Actively Managed Fixed Income ETF 

Schwab Asset Management announced the launch of the Schwab Ultra-Short Income ETF—its first actively managed fixed income ETF. The first day of trading is expected to be on or about August 13. 

With an expense ratio of 0.14%, the ETF is priced below the industry average of 0.25%. The ETF will provide access to the U.S. dollar-denominated investment grade, short-term bond market and is designed to serve as part of a diversified portfolio. 

The goal of the ETF is to seek current income consistent with capital preservation while maintaining liquidity, according to Schwab. The ETF invests securities issued by U.S. and foreign issuers and will maintain a portfolio duration of one year or less. 

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