OPINION:
My grandfather was a Baptist pastor. I grew up in Wheaton, Illinois, in a community shaped by faith, service and nonprofit work. Inspired by that example, I served eight years in Congress. The people closest to me have always chosen service over salary.
That’s why it troubles me that millions of nonprofit and faith-based workers are being shortchanged in their retirement savings — not because of anything they did wrong but because of outdated regulations.
Here’s the issue: Corporate employees typically save through 401(k) plans, while traditional nonprofit and faith-based workers usually rely on 403(b) plans. Unlike 401(k)s, most 403(b)s are limited to annuities and mutual funds and cannot access broader investment options, including collective investment trusts.
Collective investment trusts are pooled investment vehicles managed by regulated bank trustees. They offer many of the same diversified strategies as mutual funds, including target-date funds that automatically adjust a worker’s investments as retirement approaches.
Collective investment trusts typically have much lower fees. One study found that average mutual fund fees are more than double those of collective investment trusts. For a modestly paid charity worker or church administrator, that difference can mean tens of thousands of dollars in lost retirement savings over a career.
This isn’t a theoretical problem. As of 2023, collective investment trusts accounted for 38% of all 401(k) plan assets, up from 30% just four years earlier. Collective investment trusts now hold more target-date fund assets than mutual funds, accounting for 52% of all target-date fund assets at the end of 2024.
The private sector has moved decisively toward these lower-cost vehicles, and nonprofit workers have unfortunately been left behind.
The irony is particularly sharp for the faith community. Under existing securities law, church retirement income accounts can offer collective investment trusts to their participants. Yet many religiously affiliated nonprofits, including faith-based hospitals, Christian colleges and charitable ministries, remain locked out.
The associate pastor saving through a church retirement plan may have access to these lower-cost options, but the social worker at the faith-based charity down the street, doing equally vital work, does not. That disparity makes no sense.
During my time on the House Financial Services Committee, I saw firsthand how regulatory barriers — sometimes well-intentioned, sometimes simply outdated — can hurt the very people they were meant to protect. The restriction on collective investment trusts in most 403(b) plans is a textbook example. It is one of those things you see up close and wonder, “Why hasn’t this been fixed already?”
Congress has taken steps to address this. The SECURE 2.0 Act, passed with bipartisan support in 2022, removed the tax law barriers to 403(b) plans investing in collective investment trusts. More recently, the bipartisan INVEST Act, which would allow collective investment trusts in 403(b) plans, has passed the House and is awaiting a Senate vote.
The legislative process is slow. While Congress works through its calendar, the Securities and Exchange Commission has the authority to act now. The SEC holds broad exemptive powers under federal securities laws, and it should use them to allow all 403(b) plans to access collective investment trusts without waiting for a bill to reach the president’s desk.
Some may worry about investor protections, but collective investment trusts are already widely used in private sector retirement plans and are overseen by federal and state banking regulators, subject to fiduciary standards under the Employee Retirement Income Security Act of 1974, and often managed by SEC-registered advisers. These protections are every bit as rigorous as those governing mutual funds.
Collective investment trusts also offer flexibility. They can include allocations to broader asset classes, such as private equity, real estate and infrastructure, and can be customized to meet a plan’s specific needs, giving nonprofit retirement savers access to diversification upon which larger institutional investors have long relied.
The faith and nonprofit community has a deep stake in this conversation. Religious organizations, charitable institutions and mission-driven nonprofits employ millions of Americans, many of whom earn modest incomes and rely on their retirement plans.
Giving these workers access to better, more affordable investment options isn’t just a policy issue; it’s also a matter of fairness. A recent national survey found that nearly two-thirds of registered voters believe all retirement plans should provide access to the same investment options, regardless of employer type, with support spanning Republicans, Democrats and independents alike.
The SEC has a rare opportunity to make a meaningful difference for millions of Americans who have dedicated their lives to serving others. It should act now to level the retirement playing field for all American workers, not just those in the for-profit sector.
• Randy Hultgren represented Illinois’ 14th Congressional District from 2011 to 2019 and served on the House Financial Services Committee. He is a graduate of Bethel University and Chicago-Kent College of Law.
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