The INVEST Act seeks to open 403(b) plans — often held by teachers, nonprofit employees, and others — to Collective Investment Trusts (CITs). On the surface, supporters call this “modernizing retirement,” “parity with 401(k),” and “lower cost institutional investing.” Sadly, rhetoric like that obscures a far darker truth: for many Americans, this law would legalize a structural conduit for hidden fees, opaque private-market gambles, and regulatory arbitrage — all at the expense of transparency, fiduciary duty, and retirement safety.

🚨 CITs Are Fundamentally Different From Mutual Funds — and Risky

• CITs are not SEC-regulated; rather than SEC oversight, they operate under state banking/trust law (or OCC, IRS/DOL) when they’re “state-regulated.” That means no mandatory prospectus, no N-PORT/N-CEN holdings/flow disclosures, no regular public reports, no independent boards, and — critically — no restrictions on illiquid or alternative assets. The CommonSense 401k Project+2CLS Blue Sky Blog+2
• As documented in my own recent analysis, this regulatory structure is tailor-made for ERISA §406 prohibited transactions — self-dealing, hidden revenue sharing, affiliated-manager placements, “alternative sleeves” — all far harder to spot or challenge than in a mutual-fund wrapper. The CommonSense 401k Project
• The risk isn’t just theoretical: CITs now manage trillions (by some estimates ~$7 trillion) in defined-contribution assets; many major 401(k) Target-Date Funds (TDFs) have migrated from transparent mutual funds into opaque CIT wrappers. CLS Blue Sky Blog+2Yale Law Journal+2
• https://commonsense401kproject.com/2025/11/18/state-regulated-collective-investment-trusts-cits-as-vehicles-for-erisa-prohibited-transactions/
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Thus CITs are not simply a “cheaper mutual-fund alternative.” They are — structurally — a different and far riskier regime.

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🧱 Private-Equity, Private Credit, Crypto — Hidden in Plain Sight

The real danger is not just opacity; it is that CITs under the new regime become the delivery vehicle for private markets, annuities, and alternative investments into retirement plans that ordinary savers trust to be safe. As I laid out previously: CIT TDFs as QDIAs are perfectly positioned to:

• quietly embed private equity, private credit, crypto, real-asset private placements, or other illiquid/alternative investments under a “Target Date Fund” label; The CommonSense 401k Project+2CLS Blue Sky Blog+2
• hide multiple layers of fees (sub-TA, wrap, trustee, platform, revenue-sharing), none of which are transparently disclosed; The CommonSense 401k Project+1
• create “vertical stack” conflicts of interest — e.g., the same private-equity sponsor owning the trustee, the CIT issuer, the recordkeeper, and possibly advisor-platform arms — meaning that each layer profits when savers’ money is funneled into opaque investments. The CommonSense 401k Project

In effect: under the INVEST Act, retirement savings — even for teachers, nonprofit staff, lower-paid workers — could get funneled into the same private-market gambits that now benefit ultra-wealthy fund investors. And with minimal transparency, no signal, and little chance for participants to know what’s going on until it’s too late.

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🏦 Regulatory Arbitrage — The “Hole” That Saves Private Markets

The shift to CITs represents classic regulatory arbitrage: by moving plan assets from SEC-regulated mutual funds into state-chartered trust vehicles, fund managers and private-equity sponsors escape public disclosure, liquidity/resale requirements, independent boards, and robust oversight. The CommonSense 401k Project+2NYU Law+2

That’s not just a compliance tweak — it’s a fundamental renaming of risk. A “Target-Date Fund” under a CIT is no longer the transparent, retail-friendly product most plan participants think they’re getting. It is a private-market trust in a cloak of respectability.

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⚖️ For Retirement Savers and Fiduciaries — This Is A Regression

• Fiduciaries under Employee Retirement Income Security Act (ERISA) are supposed to act with the care of a “prudent expert.” But how can that duty be meaningfully discharged when holdings, fee structures, valuation, liquidity, and conflicts are hidden? You cannot prudently evaluate what you cannot see. The CommonSense 401k Project+1
• For plan participants — especially those in nonprofit, education, public service 403(b) plans — the shift under INVEST could undermine retirement security. What looks like a “safer, institutional-grade” retirement fund might in practice be a high-fee, illiquid, high-risk private-market bet.
• And legal recourse is likely to be limited. By layering private-market investments inside bank-trust CITs, the accountability framework that protects mutual-fund investors becomes fragmented and attenuated.

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🎯 What Should Be Done Instead

If lawmakers genuinely care about “parity” and “modernizing” retirement, that shouldn’t mean sacrificing transparency and investor protections. Instead of opening the door to CITs in 403(b)s en masse, policymakers should insist on structural reforms:

1. Full disclosure — all CIT holdings, underlying investments, fees, and related-party flows must be publicly available and easily accessible to plan participants.
2. Ban or strictly limit alternative / illiquid / private-market investments in retirement-plan CITs — particularly for non–ERISA 403(b) plans — unless underlying vehicles meet public-fund standards (liquidity, valuation, reporting).
3. Independent fiduciary oversight — true independent boards or third-party fiduciaries (not affiliates of providers/recordkeepers) should manage CITs for retail retirement plans.
4. Restore mutual-fund (or equivalent) QDIA defaults — if a default is needed, default to transparent, low-cost SEC-regulated mutual funds, not opaque CIT-TDFs.

Until such reforms are guaranteed, letting 403(b) plans invest in CITs is not “modernization.” It’s a regression — a regulatory carve-out designed to benefit private-equity, insurance, and asset-management firms at the expense of everyday workers.

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📢 Conclusion: INVEST Act = Privatizing Risk Under the Guise of “Retirement Reform”

The INVEST Act’s attempt to give 403(b)s access to CITs should not be celebrated — it should be stopped, or at least substantially amended. For most Americans, retirement savings are not a speculative venture; they are a guarantee of future stability. Opening the door to opaque, alternative-heavy, private-market trusts — without meaningful transparency or fiduciary protections — undermines the very purpose of retirement plans.

Congress should reject the “privatization of risk” in favor of real retirement security: transparent, liquid, low-cost investments — not hidden private-equity funnels.