Bill that could expand access to annuities headed to the House

A 64-page bill that packages more than 20 measures to improve retirement and other investment options advanced out of committee and is headed to the House of Representatives next week. The bipartisan Incentivizing New Ventures and Economic Strength Through Capital Formation Act, also known as the INVEST Act, includes bringing collective investment trusts (CITs) to 403(b) plans.

The bill would allow 403(b) retirement plans—used largely by teachers and nonprofit employees—to invest in the same products as 401(k) plans. It would also enable electronic delivery of investor documents and expand access to private funds for retail investors.

The INVEST Act also authorizes annuity options through unregistered insurance company separate accounts, which would provide more retirement income security to nonprofit workers.  In addition, the legislation would also re-evaluate what an accredited investor is, possibly including certified financial planners.

The legislation was introduced by House Financial Services Committee Chair French Hill (R-AR); Capital Markets Subcommittee Chair Ann Wagner, (R-M0); Representative Gregory Meeks, (D-NY); and Representative Josh Gottheimer, (D-NJ).

“These reforms are a meaningful step toward addressing the affordability crisis and empowering people to secure their financial futures,” Meeks said in a statement.

ARA has 'strong support' for the bill

In a letter to the sponsors of the bill, the American Retirement Association, which works with 14.5 million Americans in the nonprofit sector who rely on 403(b) plans for their retirement savings, wrote “to express strong support for Section 202 of the INVEST Act (H.R. 3383)—Retirement Fairness for Charities and Educational Institutions. This critical provision will enhance retirement security for American workers, such as public-school teachers, charity workers, and other retirement savers who wish to invest in CITs under their 403(b) plans, a long-standing option already available to private-sector employees through 401(k) plans.

The statement went on to say, “currently, outdated securities laws unfairly prohibit 403(b) plan participants from investing in CITs, despite their widespread use and success in 401(k) plans. Like mutual funds, CITs pool assets from multiple investors. They also typically have fees up to 53% lower than mutual funds. These savings directly benefit participants: allowing 403(b) plans to invest in CITs could save the average worker up to $28,000 in retirement—enough to cover six months of expenses—by reducing fees just 0.08% per year.

By modernizing these rules, the INVEST Act will reduce costs, improve diversification, and enhance flexibility in asset selection, all while maintaining strong regulatory oversight and fiduciary safeguards.”

Legislation has 'strong bipartisan support'

“We believe the bill is very likely to pass the House as it has strong bipartisan support. It’s the first step toward providing parity between 403(b) and 401(k) plans. It would allow those in 403(b) plans – which include teachers, nurses, college professors and hospital workers, among others – to take advantage of CIT investments and unregistered insurance company separate account options,” according to Paul Richman, chief government and political affairs officer for the Insured Retirement Institute.

He explains that virtually all retirement plans, including 401(k)s, governmental 457(b)s, and the federal Thrift Savings Plan, offer these low-cost institutional investment funds to their participants, which broaden access to lifetime income solutions like annuities. He notes that, according to Morningstar, about $1.9 trillion, or more than 50% of target-date assets are CITs.

If the bill passes the House next week, it will be sent to the Senate for deliberation and a possible vote.

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