Do 401(k) Plans have to use a lower cost CIT? CITs are causing confusion among plan sponsors. Fred Barstein, Founder and CEO, The Retirement Adviser University April 20, 2026 Both advisors and record keepers in the RPA 401(k) segment seem to be moving like lemmings from mutual funds to collective investment trusts driven by the siren's call of lower fees. But there are meaningful differences, which plan fiduciaries must consider when making that move with most plan sponsors in the under $250 million market confused and unaware of not just how they work but even their existence. During an advisor RFP conducted by TPSU, finalists offered CITs at a substantially reduced price over the mutual fund TDF proxy. The plan was very happy with their current advisor and did not want to make a switch but questioned why the CIT was so much cheaper asking if it was a different fund and wondering why their incumbent had not suggested it. Ultimately, the incumbent was retained because they convinced the client that the CIT, though cheaper, did not have a three-year history and performance lagged the mutual fund. But, as the RPA industry rapidly moves to less transparent CITs with arguably less regulatory oversight, it creates a different level of due diligence just as the DOL proposed rule on evaluation of alternative investments will change the evaluation process for all designation investment alternatives. CITs had been reserved mostly for larger plans and strategies that had more than $50 million to justify the start-up expenses. In 2015, Flexpath, which was part of NFP that also had owned RPAG, in partnership with Wilmington Trust (now Great Gray) and Blackrock, created a series of multi-manger TDFs leveraging the assets of all plans managed by RPAG members and NFP advisors. It was a revelation with other advisory firms, record keepers and asset managers following. Today, Great Gray, the dominant CIT provider for the RPA market, has close to $300 billion and has acquired both Flexpath and RPAG. As I wrote last year in a Wealth Management column (Why CITs Are Overtaking Mutual Funds in 401(k) Plans), "It's a bit of the Wild West with a weaker sheriff out there but also new opportunities for a land grab." Currently 403(b) plans with about 10% of the DC market do not have access to CITs ERISA does not require plan fiduciaries to choose the cheapest option but that has not stopped plans from moving to index funds and putting price pressure on record keepers driven by RPAs looking to show value and subsequent advisor fee decline. But as Fiduciary Decisions CEO and founder Tom Kmak once wisely declared, "Fees in the absence of value are always high." Legal and industry experts all agree that a plan may justify retention of a mutual fund over a lower cost CIT if they prefer the structure, but it is also prudent to document the process and perhaps revise their IPS. "It's no longer acceptable to not be aware of CITs or to categorically exclude them from consideration," noted Fiduciary Law Center Managing Partner Matthew Eickman. "However, a plan sponsor may become aware of CIT options and opt to retain the mutual fund for a number of reasons, such as performance reporting issues (through the advisor's fund monitoring and reporting software), minimal cost savings or participants' unfamiliarity with CITs." An advisor recently won a very large 401(k) client, which did not select to a lower cost CIT because they were concerned about conflicts of interest. But all things being equal, why wouldn't a plan choose a lower CIT that is a clone of the mutual fund? Unlike returns, fees will certainly boost a participant's retirement income. CITs may not be the same as their proxy mutual fund as many would argue raising questions of whether it can use the mutual fund performance to overcome the required three-year history most plans use. It's not like moving from an R5 to an R6 share class. Returns can differ, especially for newer and smaller CITs due to cash flow and the length of time the underlying investments have been held which, in some cases, may no longer be available. Though it is changing, it's harder to look up returns of CITs. Confusion by plan sponsors and potential conflicts are more troubling because each advisory firm and possibly record keeper could offer different pricing for the "same" investment. Litigation has made plan fiduciaries hyper focused on fees even if there are very few plans under $250 million being targeted. Share price optimization is a real issue and plans should use their scale to negotiate the best pricing on behalf of their participants and beneficiaries. But unlike mutual funds, CITs do not have a prospectus where pricing is clear. Each advisory firm and record keeper may have a different price for their own version of a CIT based on their scale incenting them to move clients into those funds over other strategies to further enhance their negotiating position. "Plan fiduciaries must be able to clearly articulate and document why pricing differences exist, including how services' scale or structure are genuinely differentiated," Chris Randall, managing director, Retirement Services, SEI, noted. "Asset managers, in turn, must be prepared to explain and defend pricing outcomes as plans change record keepers, advisors, or consultants. As a result, we are increasingly seeing asset managers introduce general consultant or standardized share classes with defined AUM targets to improve transparency and support more consistent benchmarking across platforms." Conflicts could arise if the firm deploys a centralized 3(38) and is paid additional fees even if the overall cost is lower. And some providers are inserting proprietary investments from their general accounts or using options to boost returns which would essentially make it a different fund which, while potentially worthy of consideration, cannot be considered a proxy of the mutual fund it is relying on for a three-year history. "As a positive, competitive pricing negotiations are driving overall investment costs down broadly. This is a clear benefit for plan participants." stated Michael Esselman, OneDigital's CIO. "However, this dynamic is beginning to create 'winner takes all' scenarios. Advisory firms seeking to offer the most competitive CIT pricing are finding they must concentrate assets into one or two strategies per asset category, regardless of whether those strategies are the best fit for each individual plan sponsor. Over time, this concentration of assets may reduce the range of options available to plan sponsors, limiting the ability to match the right strategy to the right client." Consolidation is rampant throughout the DC industry. While neither good nor bad, the move to CITs by advisory firms will accelerate consolidation of advisors edging out those that do not have access to lower cost CITs or the scale to negotiate lower prices. While lower costs overall benefit plans and participants, choices will be more limited. CITs have been a revelation to the RPA 401(k) market with lower costs and overall positive trend. But it will require significant education of plan sponsors and investment committees, new levels of due diligence and revisions of their IPS that should clearly state the CIT's value understanding the issues like potential conflicts of interest. Founder and CEO, The Retirement Adviser University Fred Barstein is founder and CEO of The Retirement Adviser University, a collaboration with UCLA Anderson School of Management Executive Education, The Plan Sponsor University and 401kTV. He had been contributing editor for InvestmentNews where he created RPAConvergence and the RPA Roundtables & Thinktanks for senior managers at DC record keepers, aggregators, broker dealers and CIOs. He helped create the National Association of Plan Advisors as a member of the founding Leadership Board, Chair of the Membership Committee and was founding Editor-in-Chief for NAPA-Net which he led until 2016. Barstein received his Bachelor of Arts Degree from Boston College and his Law Degree from Cardozo School of Law, Yeshiva University.