U.S. employers offering 403(b) retirement plans will benefit from access to collective investment trusts, according to a report by the Defined Contribution Institutional Investment Association.
It noted the latest version of the Securing a Strong Retirement Act passed the House in March and, if it passes through the Senate with language that allows institutional 403(b) plans to offer collective investment trusts, those plans could potentially benefit from pricing and administrative efficiencies, as well as more choice in short-term investing options, including pooled stable value funds.
Currently, 403(b) plans can only invest in registered funds and annuity contracts, said the report, noting collective investment trusts often cost less compared to similar investment vehicles, such as mutual funds, have fewer overhead costs and can offer greater fee flexibility due to varying pricing structures.
And because collective investment trusts are generally used as building blocks for white label and multi-manager products, 403(b) plans could include these products in their plan investment offerings. “White label or multi-manager products can streamline investment menus and provide sponsors the flexibility to add and remove managers more efficiently,” said the report.