A new report from the non-partisan Congressional Budget Office does little to calm the nerves of retirees and the millions of Americans planning for retirement. The annual forecast estimates that Social Security’s trust fund will run dry by 2032, a year earlier than previously estimated, at which time benefits will be cut by about a quarter across the board – equal to $18,500 per year for the average couple.
The findings further reaffirm a hard truth: Americans are facing a retirement crisis, and they need access to the full spectrum of investment vehicles to avoid it.
That is doubly true for more than 14 million teachers, pastors and clergy people, healthcare professionals, and non-profit workers, who rely on 403(b) accounts as their primary retirement contribution plans.
403(b) plans are a primary tax-advantaged retirement savings mechanism for public schools, tax-exempt organizations, and churches. Unlike the private sector’s 401(k), 403(b) accounts are subject to outdated regulations that exclude collective investment trusts (CITs) – modern, low-cost wealth-building financial instruments.
This month, I joined conservative leaders to call on the U.S. Securities and Exchange Commission (SEC) to exercise its executive authority to repeal restrictions that stifle competition and limit investment options. It is a matter of fairness and retirement security, not politics.
President Trump and his advisors understand the challenges hard-working Americans face, and they have taken bold action to modernize and democratize investment tools. Five million children have signed up for Trump Accounts, almost a quarter of whom are eligible for a $1,000 federal pilot contribution. Last month, the Department of Labor issued new guidance to make alternative assets, such as private equity and real estate, more accessible in retirement plans.
These reforms are meaningful steps to empower ordinary individuals with greater financial security. But to build an economy where long-term saving starts at birth and continues into retirement — no matter the occupation — policymakers must amend federal securities law to allow CITs to be included in 403(b) plans.
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Like mutual funds, CITs allow investors to pool their funds in a mixture of stocks and bonds. Because they are managed by bank regulators, CITs have lower compliance costs and fewer fees than active and passive mutual funds. More of investors’ money is directed into generating returns, rather than sunk costs, which do nothing to benefit investors.
The difference can be significant. For an individual earning $74,000 per year, higher management costs and fees associated with a 403(b) plan can create an investment gap of up to $28,000 during a 40-year career. If CITs were allowed in all 403(b) plans, non-profit workers’ retirement wealth would increase by as much as $590 million annually.
Already, CITs are a mainstay of private 401(k) plans. These bank-managed assets nearly quadrupled in defined contribution retirement plans between 2013 and 2023, growing from about $800 billion to over $3.2 trillion. They hold more target date assets than mutual funds and can be structured more flexibly to include alternative assets than SEC-registered funds. In other words, they are a good, reliable investment vehicle.
The INVEST Act, which was passed in the U.S. House of Representatives last year, sought to allow 403(b) accounts to invest in CITs, underscoring the bipartisan support for reforming the outdated rules. But the millions of Americans who rely on these plans cannot afford to wait for a legislative fix – especially as Washington seems to slip further into partisan gridlock almost daily.
Every day, this issue gets kicked down the road is another day workers miss out on investments that could bolster their retirement readiness. The SEC has the authority to amend the rulebook, and it shouldn’t be wary of using it. With a stroke of its pen, the Commission could expand access to CITs, and retirees would jump for it.
President Trump understands the challenges working-class individuals and families are up against, from the rising costs of basic goods to interest rates that have put the American dream out of reach for many. His administration has, and continues to, tackle these problems head-on. Now, they should turn their attention to the teachers, religious, and non-profit workers who rely on 403(b)s and act swiftly to give them the same fair shot at a secure retirement.
Ken Blackwell is the President of the Council for National Policy in Washington, DC
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