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What are Common Collective Trust Funds in a 401(k) Plan?

Published by Kim Moore on Apr 22, 2021 6:00:00 AM

Common Collective Trusts (CCT)

Your 401(k) Plan may contain investments called Common Collective Trusts (CCT). These are vehicles usually operated by a bank or trust company. It is a product sold primarily to employee benefit plans such as 401(k) plans. Currently, over 20% of 401(k) Plan assets are held in CCT’s.401k investment- Common -Collective-Trust Fund

The CCT holds a variety of individual investments within the trust that can include mutual funds, bond or money market investments and other types. Diversification can be provided in one pooled investment with a CCT. However, there most often is a single investment philosophy or objective that guides the investment manager when selecting the investments to include in the trust. It is important to understand the trust objectives and risk profile before you include a CCT in your Plan.

One of the significant differences between a mutual fund and CCT is that the CCT is not registered with the Securities and Exchange Commission. These funds are not targeted to the general public but to the institutional investor such as a series of 401(k) Plans. They do not produce a Prospectus that you can review but instead offer a Declaration of Trust. Even though a Prospectus is not available, the third-party provider that you work with for your Plan should be able to provide information to you as you evaluate the various investment alternatives available to the Plan. In addition, since the CCT is not a publicly available fund, the fees charged can be more flexible than with a standard mutual fund.

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