A bipartisan U.S. Senate proposal could give about 15 million workers more choices for their retirement savings.
The Senate Banking Committee discussed the plan Thursday during a hearing on ways to help businesses raise money.
The measure deals with 403(b) retirement plans. Those plans are used by public school teachers, hospital workers, church employees and workers at other nonprofit groups.
401(k) plans are common in the private sector. Those plans can offer collective investment trusts, also known as CITs. Federal securities law generally blocks 403(b) plans from offering the same funds.
CITs pool money from many retirement plans into a single fund. Banks and trust companies often run these funds. They often work much like mutual funds, but they lack the same federal registration and reporting costs. That can make them cheaper.
Sen. Katie Britt, R-Ala., compared the funds to shopping at a warehouse club.
“Workers can pool their retirement savings so that they can receive lower prices, much like buying in bulk at Sam’s or Costco,” Britt said.
A 2025 Vanguard study found that investment fees in 403(b) plans averaged 0.41%, compared with 0.33% in 401(k) plans. The firm estimated that a worker earning a median salary could lose $23,000 to $28,000 over a career because of a fee gap of 0.08 to 0.09 percentage points.
The funds have become common in 401(k) plans. CITs now hold more target-date fund assets than mutual funds, according to Morningstar.
Congress took a step toward opening the funds to 403(b) savers in the SECURE 2.0 Act of 2022. That law changed the federal tax code. It did not make the necessary changes to two federal securities laws.
Dalia Blass, a former director of the Securities and Exchange Commission’s Division of Investment Management, told senators that those gaps still block the funds.
“SECURE 2.0 fixed the tax barrier, but it did not fix two securities law barriers,” Blass said.
She said a CIT offered through a 403(b) plan would lose exemptions under the Investment Company Act of 1940 and the Securities Act of 1933. Congress would have to change both laws.
Britt’s Retirement Fairness for Charities and Educational Institutions Act would make those changes. Sen. Raphael Warnock, D-Ga., is one of 19 Senate co-sponsors. Thirteen members of the Banking Committee have signed onto the bill, committee Chairman Tim Scott, R-S.C., said Thursday.
The change would let a 403(b) plan offer CITs. It would not force a plan to add them. Employers and plan managers would still decide which funds workers can use.
Kenneth Bentsen, president and chief executive officer of the Securities Industry and Financial Markets Association, backed the bill.
“This is a gap that needs to be corrected,” Bentsen said.
Mike Flood, a senior vice president at the U.S. Chamber of Commerce, said the legislation would not change how the funds are picked, but it would add to the list of funds a plan could choose.
The House passed the same policy in December as part of the INVEST Act. That measure passed 302-123, with all Republicans and 87 Democrats voting for it.
Britt said she will try to add the policy to other proposals that could reach the Senate floor. Her stand-alone bill remains in the Banking Committee.
