Vanguard’s latest report makes a blunt point: allowing collective investment trusts (CITs) in 403(b) plans could save the median plan participant about 0.08% to 0.09% annually compared to mutual fund fees—translating into $23,000–$28,000 less paid in fees by age 65 for someone earning $74,000 a year. That’s enough to cover six months of living expenses in retirement for one person.
Here’s the kicker: 10 million educators, healthcare workers, and nonprofit employees are left behind by plan regulations barring CIT access in most 403(b)s. Meanwhile, their private-sector counterparts in 401(k) plans enjoy lower-cost, institutional-tier investment options.
Why It Matters—and Fast
CITs aren’t gimmicks. They’re institutional investment vehicles regulated by OCC and state banking authorities, not the SEC—so they sidestep much of the retail marketing and disclosure regime. That makes CITs cheaper to run and easier to customize for large plan groups.
Since August 2024, CITs have even surpassed mutual funds in target-date fund assets. Yet many 403(b) plans remain frozen in time. This isn’t a small oversight—it’s a systemic inequity that costs participants real dollars over decades.
Legislative Progress—but Still No Access
The SECURE 2.0 Act tweaked tax law to permit CITs in 403(b)s, but securities law wasn’t updated, so most plans still can’t offer them. Recently, legislation—H.R. 1013, the Retirement Fairness for Charities and Educational Institutions Act—advanced from committee on a bipartisan 43–8 vote to bridge that gap.
One proposed amendment to restrict CITs only to ERISA-covered 403(b)s was defeated. That means potential access expands—not contracts—and that’s vital because ERISA fiduciary standards apply regardless of plan tax status .
Fiduciaries, Don’t Sleep on This
If you oversee a 403(b) plan today, you have options—but you still can’t offer CITs until the law changes. That means it’s incumbent on plan sponsors and advisors to engage lawmakers and support reform—both for compliance and participant benefit.
Even small fee differences can compound into substantial retirement savings. The longer this disparity persists, the more nonprofit workers pay—and the more they lose out on potential compounding. That’s not accidental—it’s a fiduciary blind spot worth fixing.
Bottom Line
This is not theory. It’s not a cost-savings calculator exercise. It’s real dollars that could be preserved for teachers, nurses, public school employees, and nonprofit staff for decades to come. If you’re serious about fiduciary duty—not just compliance—you need to be part of the solution.
Because when a quarter-percent difference translates into six months of income in retirement, it’s not small—it’s meaningful. And waiting is not an option.
