A new Senate proposal gives Americans more financial choices in their retirement planning, enabling them to make the most of the money they earn during their working years and to prepare well for retirement.
Under the current system, individuals who do not have a 401(k) account through an employer are limited in the retail products in which they can invest. Teachers, church employees, and workers for other nonprofit organizations have their employer-provided retirement funds invested in 403(b) retirement plans instead of a 401(k). In a 403(b) account, the investor is limited to products such as annuities and mutual funds and cannot access more sophisticated products available to 401(k) investors. About 10 million Americans are saving for retirement using a 403(b) account.
Employees in nonprofits are not provided the same investment opportunities as other private-sector employees. Sophisticated investment strategies should not be restricted based on job type. All investors, whatever their occupation, should have the opportunity to participate in the investment opportunity that would benefit them the most. Unnecessary regulations, such as these rules restricting 403(b) plans, prevent employees from investing their money in the most efficient way possible.
Fortunately, a legislative solution is in the works. By streamlining regulations so that the same investment rules apply to workers in both the public and private sectors, as well as for-profit and nonprofit sectors, Congress will help all Americans benefit from their hard work during their working years.
The Retirement Fairness for Charities and Educational Institutions Act, now parceled in the INVEST Act, allows employees of nonprofits to invest in collective investment trusts (CITs). In a CIT, a bank pools funds from multiple investors and purchases a diversified selection of assets. CITs are available to 401(k) investors, and the INVEST Act would provide them as a choice to 403(b) investors as well.
CITs are typically cheaper and carry lower fees for investors. The average 401(k) plan, which includes CITs, incurs 0.33% investment costs, while costs for 403(b) investors, excluded from CITs, are 0.41%. This means that, on average, 403(b) investors must pay an extra 0.08% in investment costs. Over a 40-year career, this adds up to approximately $23,000-$28,000 in lost savings by age 65. Providing access to CITs will help 403(b) investors retain more of their investments as they save up for retirement.
The INVEST Act passed the House in December of 2025 by a strong bipartisan majority and is now up for consideration by the Senate.
For the approximately ten million Americans who work for nonprofits and use 403(b)s, the inclusion of more investment options will give them the best possible choices for their retirement. All Americans deserve to have their retirement savings treated in the same way, with the same opportunities to set themselves up well for the end of their working years.