This bill amends three federal securities statutes to treat certain 403(b) retirement plans as outside the scope of investment company and certain registration rules. The change creates a pathway for 403(b) plans sponsored by charities, educational institutions, and similar employers to use collective trust funds, separate accounts, and custodial arrangements that currently are more commonly available to 401(a)/401(k) plans.
The practical effect is to broaden investment‑pooling options for nonprofit and educational plan sponsors, potentially lowering costs and expanding available investment strategies. Those benefits come with new compliance hooks: employers or their designees must accept or already be subject to fiduciary duties and, in some cases, must review and approve each investment option before offering it to participants.
At a Glance
What It Does
The bill inserts 403(b) plans into exemptions in the Investment Company Act of 1940, the Securities Act of 1933, and the Securities Exchange Act of 1934 so that qualifying 403(b) arrangements can be treated like exempt employee benefit plans (e.g., 401(a) plans) for purposes of registration. It conditions those exemptions on ERISA Title I coverage, an employer’s agreement to serve as a fiduciary for investment selection, or, for governmental 403(b) plans, a prior review-and-approval process for each investment alternative.
Who It Affects
Tax-exempt employers that sponsor 403(b) plans (charities, schools, and other nonprofit institutions), governmental employers with 403(b) arrangements, banks and trust companies that maintain collective trust funds, insurance separate-account managers, mutual fund/asset managers, and ERISA/retirement plan advisors who run or advise those plans.
Why It Matters
If enacted, more 403(b) plans could gain access to lower-cost pooled vehicles and custom separate accounts previously used mainly by 401(k)/pension plans, changing product flows and fees across retirement markets. It also shifts some investor-protection emphasis away from securities registration toward plan fiduciary oversight and administrative pre-approval practices.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
The bill rewrites several cross-references and exemptions in federal securities laws so that qualifying 403(b) retirement plans are treated the same as other employee benefit plans for several important securities-law purposes. At the Investment Company Act level, the amendment expands the 3(c)(11) exemption (the employee benefit plan exclusion from the definition of an investment company) to expressly include custodial accounts under 403(b)(7), collective trust funds and separate accounts holding assets of plans that meet section 403(b) of the Internal Revenue Code, provided specific conditions are met.
Those conditions create two routes: plans already covered by ERISA Title I qualify, and other 403(b) plans qualify if the employer agrees to act as a fiduciary for selecting the plan’s investment menu.
For governmental 403(b) plans the bill adds an operational control: the employer, a plan fiduciary, or a designated representative must review and approve each investment alternative before it is made available to participants. That is a discrete pre-offer approval duty distinct from ordinary ongoing monitoring; in practice it will require documented diligence and an approval process for each new fund or vehicle added to plan menus.
The statute ties these approval requirements to eligibility for the securities-law exemptions, making them a gating condition to access pooled vehicles that otherwise would be subject to registration and disclosure rules.Parallel edits in the Securities Act and the Exchange Act update the list of persons and plans exempted from registration and treatment as an investment company or issuer. The bill also contains a small conforming change to the Exchange Act’s Section 12(g) cross-reference.
Importantly, none of these edits changes tax qualification rules under the Internal Revenue Code. The bill operates solely by altering how federal securities law classifies and treats certain 403(b) arrangements and the pooled vehicles that hold their assets.
The Five Things You Need to Know
Section 2(a) amends Investment Company Act §3(c)(11) to permit collective trust funds and separate accounts to include assets of 403(b) plans if the plan is subject to ERISA Title I, the employer agrees to serve as the investment‑selection fiduciary, or the plan is governmental and its investment alternatives are preapproved.
The bill requires that for governmental 403(b) plans the employer, a fiduciary, or a designated representative 'reviews and approves each investment alternative' before that investment can be offered to participants — a pre‑approval gate tied to the exemption.
Section 2(b) amends Securities Act §3(a)(2) to add qualifying 403(b) plans to the list of persons/plans whose offerings are exempt from registration, subject to the same ERISA/fiduciary/preapproval conditions.
Section 2(c) revises Exchange Act §3(a)(12)(C) and the related §12(g) cross‑reference so qualifying 403(b) plans are not counted as 'issuers' or 'investment companies' that would otherwise trigger registration or reporting duties.
The bill leaves tax‑qualification rules untouched: it changes only securities‑law treatment, not IRC section 403(b) or ERISA’s qualification standards.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Short title
Names the act the 'Retirement Fairness for Charities and Educational Institutions Act of 2025.' This is purely stylistic but signals the bill’s policy focus on nonprofit and educational employers that historically rely on 403(b) plans.
Adds 403(b) plans to employee-benefit plan exclusion
This is the bill’s operational engine. It expands the 3(c)(11) exclusion so that collective trust funds and separate accounts may hold 403(b) assets without the pooled vehicle being treated as an investment company, provided qualifying conditions are met. The clause creates three distinct qualifying pathways: (1) the plan is already covered by ERISA Title I; (2) the employer agrees to serve as the fiduciary for selecting investment alternatives; or (3) the plan is governmental and each investment alternative has been reviewed and approved before being offered to participants. For banks and trust companies, that means they can accept 403(b) plan assets into collective trusts that previously were limited to ERISA-covered plans or other exempt vehicles.
Treats qualifying 403(b) plans as exempt for registration
This amendment inserts qualifying 403(b) plans into the Securities Act’s list of entities and transactions exempt from registration. The practical effect is that securities or interests issued into the plan context (for example, interests in a collective trust) will not require the same registration filings and prospectus delivery that public investment companies must provide. The exemption is conditional on the same ERISA/fiduciary/preapproval criteria referenced in the Investment Company Act change.
Prevents qualifying 403(b) plans from triggering 'issuer' reporting rules
Edits to the Exchange Act keep qualifying 403(b) plans from being treated as issuers or investment companies for Exchange Act purposes. That reduces the chances that pooled vehicles serving these plans will trigger registration or reporting duties under the Exchange Act, and aligns Exchange Act treatment with the Investment Company Act and Securities Act edits. Practically, it lowers the regulatory compliance bar for pooled investment vehicles that serve qualifying 403(b) plans.
Aligns cross-references to the new exclusion
A narrow technical change updates a cross‑reference in Section 12(g) of the Exchange Act so that the new 403(b) plan exclusion plugs into the framework used to determine which issuers must register with the SEC. This prevents unintended coverage gaps or overlaps between statutes.
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Charitable and educational employers that sponsor 403(b) plans — gain access to collective trust funds and separate accounts that can lower plan operating costs and expand institutional investment options.
- Plan participants employed by nonprofits and schools — likely to benefit from lower recordkeeping and investment fees and from access to institutional share classes and pooled strategies not commonly available in retail annuities.
- Banks, trust companies, and asset managers offering collective trusts and separate accounts — win a new market segment as more 403(b) assets become eligible to flow into pooled vehicles.
- Plan advisors and recordkeepers that can configure institutional platforms for 403(b) sponsors — have new business opportunities advising on fiduciary processes and menu approvals required to access the exemptions.
Who Bears the Cost
- Employer plan sponsors who agree to serve as fiduciaries — take on explicit selection duties and potential legal exposure if they fail to satisfy the new review-and-approval standards.
- Smaller charities and institutions without internal compliance capacity — face administrative and due-diligence burdens to document the required pre-approval processes, which could offset some fee savings.
- Insurance companies and providers of retail annuity products — may lose assets and fee revenue as sponsors move funds into lower-cost pooled vehicles that escape registration requirements.
- Regulators and plaintiff-side lawyers — may bear increased enforcement or litigation workload clarifying obligations and policing cases where discretionary approvals or disclosures are contested.
Key Issues
The Core Tension
The central dilemma is packed into a trade-off: expand access to lower-cost, institutional investment vehicles for nonprofit and educational 403(b) plans, or preserve the investor protections that registration and disclosure historically provide — the bill leans toward cost and access but leaves open whether fiduciary oversight will supply equivalent protection.
The bill shifts regulatory treatment without changing underlying tax or ERISA qualification rules, creating a legal choreography between securities-law exemptions and fiduciary obligations. That shift can lower transaction costs but raises a classic substitution problem: registration and disclosure requirements imposed by securities laws serve as investor protections that employer fiduciary oversight does not perfectly replicate.
The statute makes employer review and approval a condition for the exemption but does not define the standard of review, documentation requirements, or whether an employer can delegate the pre‑approval task to outside advisors without retaining legal exposure.
Operationally, sponsors will need processes to document pre-approval of each investment alternative, maintain records, and be prepared to defend decisions under ERISA fiduciary standards and potentially securities‑law theories. The bill also creates interagency ambiguity: enforcement and interpretive responsibility will sit across the SEC and the Department of Labor, but the text does not specify coordination mechanisms or how disclosure expectations for pooled vehicles servicing 403(b) plans should be calibrated.
Finally, the language could encourage regulatory arbitrage — sponsors might seek classification routes (e.g., asserting ERISA coverage or governmental status) to access pooled vehicles while avoiding the administrative buildup that the statute’s conditions intend to create.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.