Investment Policy Statement

An Investment Policy Statement (IPS) is a client-specific document designed to address the objectives, constraints, goals, and oversight procedures that govern the investment related procedures of a Retirement Plan under ERISA. An IPS should also include information regarding how assets will be allocated, acceptable risk levels, and standards for performance measurement.  An IPS will protect the plan committee or other fiduciaries responsible for investments by setting out procedures for fulfilling fiduciary responsibilities.

Is there a downside to having an IPS?  Yes, if it’s not followed.[1] 

While there is no requirement under (ERISA) that a company must have an IPS, if created an IPS should have the necessary components to demonstrate that a clear process and methodology are in place for making investment decisions.

The IPS answers the following critical questions for the fiduciaries:

  • The purpose of the plan
  • Investment Objectives
  • Roles & Responsiblities
  • Investment Manager Selection
  • Investment Selection
  • Performance Monitoring
  • Investment Expense Accounting

Once created, we work with plan sponsors to ensure it is implemented as designed. We review the IPS at least annually. 

One of the main purposes of the IPS is to create a chain of communication between all parties and as a way to communicate with the plan participants in helping them understand the rationale for the plan’s design, especially as it relates to their investment choices. The IPS is a great tool to assure plan participants that the goal of the Plan is to provide strong investment options, optimum asset diversification, reduce risk and lower investment costs.

 

[1] In the case of Tussey v. ABB. Inc., Plan Sponsor was ordered to pay $21.8 Million dollars to make up for investment losses found to be caused where an IPS was adopted but not correctly followed.

For assistance with your 401(k) Investment Policy Statement, call us at 877-595-0833 or fill out the form below.


Questions? Fill out the form below:

Fill out my online form.

Latest Updates & Information

2 Q 2018 Market Commentary

The 2nd quarter continued to roll out strong economic results in the U.S. Some of this good data buoyed the market slightly in Q2.

Read full story here

Second Quarter 2018 Market Insights Video

Check out the Second Quarter Market Insights led by Beth Spurry, CFP, CTFA.

Watch video here

1 Q 2018 Commentary

International Markets continue to be the most favored area of investment for the first quarter of 2018 and looking forward for the next 12 months. The best performing asset class in Q1 was emerging market.

Read full story here