What are CITs?
CITs are strictly regulated investment vehicles that are available only to tax-qualified retirement plans that are overseen by plan fiduciaries or other responsible professionals. Unlike other investment products, such as mutual funds, CITs cannot be offered outside of retirement plans or directly to individual retail investors that might buy them without professional representation or oversight.
As an investment product designed exclusively for retirement plans, CITs have rapidly become a cornerstone of U.S. workers’ retirement savings. Today, more than 80% of defined contribution plans, including 401(k)s and 457(b)s, offer CITs.¹ In fact, CITs are the most prevalent investment vehicle in defined contribution plans today.²
Retirement plan fiduciaries and other responsible professionals add CITs to investment lineups, and U.S. workers choose to invest in them, because they offer lower fees, on average, than equivalent mutual funds from the same asset managers. CITs can also be tailored to meet the needs of retirement plan investors in ways that mutual funds cannot.
CITs’ focus on retirement plans makes them a better choice for employees – they are subject to strict regulations that provide robust protections for retirement plans and the U.S. workplace investors they serve.
Benefits of CITs
1
Lower Cost
CITs often confer meaningful cost savings and do so without sacrificing strict regulatory oversight and investor protections. Compared to mutual funds, for example, investing in CITs can mean:
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An average savings of 50% on fees versus passively managed funds.⁵
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An average savings of 60% on fees versus actively managed funds.⁶
Lower fees mean retirement savers can put more of their hard-earned dollars to work in their retirement accounts, and the money saved can compound over time.
These savings are meaningful. Even a small percentage in the reduction of fees could amount to tens or even hundreds of thousands more dollars saved over a U.S. worker’s career, giving that person a better chance at a secure retirement.
2
Improved Security
Allowing the hard-working public-school teachers, hospital employees, charity workers and employees of other tax-exempt organizations whom 403(b) plans serve to invest in CITs will, in many cases, improve the security of their retirement savings. By providing access to the same investment manager and investment strategy as corresponding mutual funds, but often at meaningfully reduced costs that compound over time, access to CITs can significantly enhance nonprofit workers’ savings at retirement – and their corresponding retirement security.
These retirement security benefits come at the benefit, and not at the expense, of strict regulatory oversight and retirement investor protections. CITs are governed by a matrix of overlapping laws and regulations, including the Employee Retirement Income Security Act (ERISA)’s strict fiduciary standards and prohibited transaction rules.
CIT Oversight
ERISA – The Employee Retirement Income Security Act (ERISA) requires CIT trustees to follow its strict fiduciary standards and prohibited transaction rules. Under ERISA, CITs must be managed in the sole interest of and benefit to the retirement plan participants and beneficiaries who invest in them. That means CIT trustees must act prudently – investing with care, skill and diligence – and must diversify their investments in order to minimize the risk of large losses.⁷ CIT trustees are held liable for losses resulting from the breach of these duties.
Regulatory Oversight – Depending on where a CITs trustee is chartered, they are overseen by federal or state banking regulators.
Federal Securities Law – CIT trustees may hire an investment firm to serve as a sub-advisor to manage the assets within the CIT. Sub-advisors are typically regulated entities that are overseen by the SEC as registered investment advisors. When advising CITs, sub-advisors are also subject to the same strict ERISA standards as CIT trustees.
At present, some 403(b) plans are not subject to ERISA, meaning their participants and beneficiaries miss out on the law’s robust protections. Granting these plans access to CITs would change that. As long as there is one ERISA plan (e.g., a 401(k)) participating in a CIT, the entire CIT must be governed pursuant to ERISA, thereby extending the law’s benefits to all participants such as a 403(b) plan that is not subject to ERISA:
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Courtesy Great Gray Trust Company, LLC
¹Steele, J. (2023, March 27). Callan Survey: Legislation, Regulation, and Litigation Driving Change in DC Plans. Callan.
⁵Rohr, J. Y., Beogradlija, V., Margaria, S., & Sater, B. (n.d.-a). 2025 Target-Date Fund Landscape. Morningstar.
⁶Rohr, J. Y., Beogradlija, V., Margaria, S., & Sater, B. (n.d.-a). 2025 Target-Date Fund Landscape. Morningstar.
⁷U.S. Department of Labor. (n.d.). Fiduciary Responsibilities