In comments submitted in connection with the Department of Labor’s (DOL’s) proposed regulation regarding use of alternative investments in retirement plans, retirement industry representatives are encouraging the rule writers to include in their final rule specific examples that demonstrate how a fiduciary can include a collective investment trust (CIT) in a retirement plan’s investment options and still satisfy the proposed new rule through use of its safe harbor.

Industry comments noted that the pending proposed regulation lacks detail on CITs and that this lack must be corrected for the regulation to be “vehicle-neutral.” This is necessary for plan sponsors/fiduciaries to view CITs on equal footing with mutual funds, the comments stated. This is important because CITs are increasingly popular within retirement plans, commentators said.

CITs are pooled investment vehicles that combine the assets of multiple investors and are cheaper than and regulated differently from mutual funds. They have become an increasingly common mode of investment for defined contribution plans, and benefits attorneys said they expect CITs to be a main vehicle to add private market exposure once the proposal is finalized, because of their widespread use within target-date funds and their different liquidity standards.

Prospects: Many in the retirement and financial services communities believe that the lack of clarity on CITs specifically was no more than an oversight, and thus they are hopeful that DOL will correct this in the finalized version of the regulation. The final version is not yet available, nor is there a projected date for finalization. NAIFA will keep you posted.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org