NAGDCA Highlights CITs in 403(b)s and Roth Rollovers as Key Legislative Priorities

The National Association of Government Defined Contribution Administrators, a nonprofit group of government and private organizations serving public employee retirement plans, released on Thursday its 2024 priorities, including six legislative items that represent key objectives for NAGDCA.

CITs and Separate Accounts for 403(b) Plans

The first item on NAGDCA’s list is working for policymakers to permit collective investment trusts and separate accounts in 403(b) plans, both of which are currently permissible in 401(k) and 457 plans.

The SECURE 2.0 Act of 2022 included amendments to the tax code that would have permitted CITs and insurance separate accounts in 403(b)s, but the corresponding securities law language was not also updated. CITs are pooled investment vehicles similar to mutual funds, but managed by a bank and normally have lower fees than mutual funds. Insurance separate accounts are another pooled investment vehicle but managed by an insurance company.

The Retirement Fairness for Charities and Education Institutions Act, which would update securities law to permit both in 403(b) plans, passed the House in March, but has not yet been taken up by the Senate.

Account for Differences Between Government and Private Sector Plans

NAGDCA also emphasized as a priority working to ensure that Congress should account for the different needs of government plans when legislating.

In some cases, the body noted, treating government plans like corporate plans can be beneficial by promoting simplification; in other cases, government plans should be treated differently. For example, NAGDCA noted that government plans are not subject to the Employee Retirement Income Security Act and government plans can take advantage of special catch-up contribution provisions; the organization argued that these provisions should not be changed.

National Retirement Security Month

In addition, NAGDCA called for October to be National Retirement Security Month “to elevate the importance of personal retirement planning.”

Expanding Roth Plans

The nonprofit will also be focused on boosting the use of post-tax Roth savings accounts for public employees.

Under current law, an investor can roll assets over from a traditional individual retirement account to a traditional defined contribution plan. However, the same cannot be done from a Roth IRA to a Roth source within a plan. NAGDCA will be making the case for this to be changed for all DC plans.

Reasonable Implementation Deadlines

Government plans are often known to face difficulties in implementing new mandates. This is primarily due to their complicated payroll systems, but government plans also sometimes require updates due to state law.

As such, NAGDCA called for what it sees as reasonable time for government plan administrators to comply. The organization also argued for “Congress to consistently delay the implementation date of government-applicable legislative provisions by 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan from the publication of final regulations.”

Enhance Distribution Choice

Lastly, NAGDCA called for permitting “Qualifying Charitable Distributions (QCDs) from 457(b), 401(a), 401(k) and 403(b) plans, as they are from IRAs.”

Currently, tax breaks from QCDs are only available if made from IRAs, not qualified savings plans.