Retirement Bill Tightens Rules for 403(b) Plans: Employers Must Act as Fiduciaries for Investment Selection

The “Retirement Fairness for Charities and Educational Institutions Act of 2025” is a technical bill focused on cleaning up the regulatory landscape for 403(b) retirement plans. If you work for a non-profit, hospital, university, or public school, this is your retirement plan. The bill doesn't change contribution limits or eligibility, but it makes crucial adjustments to federal securities laws—specifically the Investment Company Act of 1940, the Securities Act of 1933, and the Securities Exchange Act of 1934—to clarify when these plans are exempt from standard registration rules.

Who’s Watching the Investments Now?

This legislation is all about adding a layer of protection and oversight to 403(b) plans by requiring clearer fiduciary responsibility. A fiduciary is someone legally required to act in your best financial interest, which is a big deal when it comes to retirement savings. For 403(b) plans that are subject to ERISA (the Employee Retirement Income Security Act), the bill now requires the employer offering the plan to agree to act as a fiduciary regarding the selection of investment options available to participants. This change is written into the exemptions for all three major securities acts (Sec. 2).

What this means in real life: If you’re a nurse at a private hospital or a professor at a private university, your employer can no longer just offer a bunch of funds and wash their hands of the selection process. They now have a legal obligation to vet those investment options and ensure they are prudent choices for the plan participants. This aims to reduce the chances of employees being offered high-fee or poor-performing funds, which can quietly eat away at retirement savings over decades.

New Rules for Public Sector Plans

The bill also addresses 403(b) plans offered by governmental entities, like public school districts or state universities, which are typically exempt from ERISA. For these governmental plans to qualify for the same securities exemptions, the bill requires that the employer, a plan fiduciary, or another authorized person must review and approve every investment alternative offered under the plan before it is made available to participants (Sec. 2).

This is a procedural safeguard, making sure someone in authority signs off on the fund lineup. However, the bill is a little vague on who exactly qualifies as “another authorized person” in the governmental context. While the intent is clearly to ensure oversight, the lack of definition here could lead to inconsistent application across different states or municipalities. For example, does that “authorized person” need specific financial expertise, or can it be anyone appointed by the school board? That detail matters for the quality of the review.

The Upshot for Employees and Employers

For the millions of people saving through a 403(b), this bill is a net positive. It formalizes and strengthens the fiduciary duty of plan sponsors, ensuring that someone is actively responsible for the quality of the investment choices. This is crucial because even small differences in expense ratios can translate into tens of thousands of dollars in lost retirement savings over a 30-year career.

For non-profit and educational employers, the bill clarifies the regulatory status of their plans, which is good for legal certainty. However, for smaller non-profits, explicitly taking on the role of a fiduciary for investment selection adds a significant new legal responsibility. They will need to ensure they have the expertise—or hire it—to meet this new standard and avoid potential liability, which is a new administrative burden.