Should 403(b) Sponsors Expect to Add New Asset Classes Soon?

Q: We are an ERISA 403(b) plan sponsor and have noticed that there is a lot of talk about expanding the types of asset classes available in retirement plans. Do these potential changes impact our 403(b) plan?

 Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: In the short term, the impact on your plan may be limited, for a number of reasons.

First, even in 401(k) plans—which allow for more types of investment vehicles, private market solutions (such as private equity and private credit) and/or cryptocurrency—these investment types are typically available “inside” an existing investment product (such as a collective investment trust). This means a professional manager oversees the fund itself so that participants need not manage these types of investments directly.

Second, because most 403(b) plans cannot invest in vehicles other than annuities and mutual funds, and because a number of those innovative investment strategies are available through CITs, these CIT solutions are not available for 403(b) plans.

However, with all that said, there is a lot of focus on this area—including expanding the availability of CITs to all 403(b) plans—so we encourage you to stay tuned.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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