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Can 457(b) Plans Offer CITs?
Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.
Q: I read an Ask the Experts column which indicated that there are generally no restrictions on 457(b) plan investments. However, my 457(b) plan recordkeeper advised me that we cannot invest 457(b) plan assets in collective investment trusts. Who is correct?
Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:
A: Well, as the column states, there are no legal restrictions, outside of possible state-level restrictions, that would prohibit a governmental 457(b) plan from investing in CITs. However, as provided in Revenue Ruling 2011-1 and subsequent guidance, a 457(b) plan sponsored by a tax-exempt entity is not permitted to invest in a CIT.
In addition, a CIT provider can always decide that it does not want to offer its product to 457(b) plans, not as a matter of law, but simply as a matter of policy (e.g., it would simply not be profitable to do so). Similarly, a recordkeeper may limit the options on its recordkeeping platform to prohibit certain CITs or prohibit CITs entirely. Thus, even if you are a governmental entity, CIT availability in your 457(b) plan may indeed depend on the investments that are available to you as a practical matter on your recordkeeping platform.
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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