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COLLECTED WISDOM™ on Investment Policy Statements

Though the law does not require a 401k plan adopt an investment policy statement, most experts agree that adopting one is a key and crucial first step in providing plan fiduciaries with a clear roadmap. Learn more from these resources.

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

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401k Advisers Push for More General Investment Policies As Fiduciary Safeguard

Abstract: The policies governing plan sponsors' investment decisions in 401k plans are adopting language that's more general rather than prescriptive in nature, as a way to safeguard against fiduciary breach and future legal action, according to advisers and legal experts.

Source: Investmentnews.com (registration may be required), November 2016

The Investment Policy Statement Tightrope

Abstract: A well-crafted investment policy statement can be one of your most effective governance tools. Many sponsors are also finding, with the intensified litigation risk surrounding DC plans, that investment policy statements are becoming an increasingly charged topic.

Source: Russell.com, July 2016

How to Conduct an Annual Investment Review

Abstract: A well-established and implemented investment policy statement is one of your best defenses against potential legal challenges in light of recent court rulings. But it's not enough just to create an investment policy statement, you must follow through on the review procedures it outlines.

Source: Investmentnews.com (registration may be required), June 2016

What to Avoid When Creating an IPS

Abstract: An Investment Policy Statement is integral to your employee retirement plan benefit. It lays out your goals, approach, methodology and overall mission for this valuable benefit. Like all operating documents its effectiveness is a function of its clarity and flexibility. Here is a brief overview of what to avoid when writing your IPS.

Source: Fiduciaryplangovernance.com, March 2016

What Should a Retirement Plan IPS Contain?

Abstract: An Investment Policy Statement serves an important role in managing your retirement plan. Aside from a statement of purpose and an overarching statement of the plan's goals and objectives, an IPS should contain several specific key items. Here is a brief checklist.

Source: Fiduciaryplangovernance.com, March 2016

Streamlined DC Investment Menu Could Save Participants Millions

Abstract: Researchers with The Wharton School at the University of Pennsylvania strive to quantify participants' behaviors before and after a fundamental rethinking of the DC plan investment menu.

Source: Plansponsor.com, January 2016

What Is an Investment Policy Statement and Why Is It Important?

Abstract: A 3(21) investment advisor can only advise you on the proper course of action. They themselves do not have the ability to make decisions or change policy. The responsibility (and liability) for these actions remains with you. In that respect, when using a 3(21) investment advisor, your Investment Policy Statement becomes all the more important.

Source: Fiduciaryplangovernance.com, October 2015

An IPS Is About Policy

Abstract: It is not good practice to use your Investment Policy Statement to identify the specific stocks or bonds or funds you will recommend for your client’s portfolio. Those are issues of implementation. One way to think about an IPS is to view it largely about "how" and "why," and not about "what."

Source: fi360.com, September 2015

An Economist's Perspective of Fiduciary Monitoring of Investments

Abstract: A central thesis is that ongoing oversight is an exercise in risk management and that risk management is a never ending process. The article emphasizes the importance of (a) examining multiple risk factors and not relying on performance numbers alone, (b) understanding the presence of financial leverage (should it exist), (c) clarifying the role of a service provider when an outside party is used, and (d) letting participants know about the type of monitoring being done by an investment committee.

Source: Pensionriskmatters.com, May 2015

How Long Should an Investment Policy Statement Be?

Abstract: There is no one right way to write an IPS. There is no prescribed set of topics that need to be included. The length of an IPS can be whatever is right for the advisor and the client. For that reason, the appropriate length of an IPS rests with what needs to be said and how detailed the discussion of the selected topics need to be.

Source: Fi360.com, February 2015

Managing Defined Contribution Plan Investment Policy Statements

Abstract: While ERISA does not explicitly require that retirement plan fiduciaries adopt an investment policy statement, there are important reasons to do so. Learn why adopting and monitoring an investment policy statement is a crucial part of any good fiduciary process.

Source: Jpmorganfunds.com, January 2015

Do Investment Policy Statements Qualify as Plan Documents?

Abstract: There is a mild conflict between the Circuits about whether a request for plan documents includes the obligation to provide a copy of the investment policy statement. A recent case out of the Fifth Circuit highlights the confusion. In Murphy v. Verizon Commc'ns, Inc., the Court of Appeals for the Fifth Circuit was asked specifically to consider whether plan investment guidelines must be provided upon request to plan participants and beneficiaries.

Source: Benefitnews.com, December 2014

Investment Policy Statements in Retirement Plans: Are They Plan Documents?

Abstract: In Murphy v. Verizon Commc'ns, Inc., the Court of Appeals for the Fifth Circuit was asked specifically to consider whether plan investment guidelines must be provided upon request to plan participants and beneficiaries. The Court looked at the requirements in ERISA and determined that the real question was one as to whether the investment policy statement was actually binding on the operation of the plan.

Source: Foxrothschild.com, December 2014

Courts May Require Disclosure of Investment Policy Statements

Abstract: In Murphy v. Verizon Commc'ns, Inc., the Court of Appeals for the Fifth Circuit considered whether investment guidelines must be provided upon request to plan participants and beneficiaries and determined that ERISA requires the disclosure of formal legal plan documents.

Source: Winston.com, December 2014

Is the IPS Just Ammunition for a Lawsuit?

Abstract: Having a written investment policy statement just makes it easier for my clients to sue you. You've probably heard that argument before, right? But that's only true if you are either unwilling or unable to follow what's in the IPS.

Source: Fi360.com, September 2014

What's in an Investment Policy Statement?

Abstract: At its core, an IPS is a document that reflects what a client and advisor have agreed to regarding how the money is to be managed. A good IPS should help each party clearly understand the other's expectations and should therefore help to avoid surprises. To consider what should go into an IPS, imagine what you or your client would not want to be surpised about what the other is doing. Those are the topics that should be documented.

Source: Fi360.com, September 2014

Investment Policy Statements

Abstract: An investment policy statement defines the processes that a company has adopted to make investment-related decisions with respect to the assets of a ERISA 403(b) and 401k plan. While the law does not require that a plan adopt an IPS, it may be the single most important task that a fiduciary performs. Here's an overview of how to construct one.

Source: Strategicbenefitservices.com, August 2014

Is an Investment Policy Statement Right for You?

Abstract: Although ERISA does not explicitly require a written governance process or investment policy statement, it is a best practice. However, an IPS with too much detail may create legal breaches if the plan sponsor fails to perform every step in the process.

Source: Ekonbenefits.com, July 2014

Do You Monitor Your Plan's Investment Decisions?

Abstract: A responsible plan fiduciary wisely selects and monitors investment decisions. These decisions are supposed to be for the exclusive benefit of your employees and their beneficiaries. That includes both the providers and the investment decisions they make. To keep yourself from unnecessary scrutiny, you should prepare and adopt an investment policy statement. The Center for Fiduciary Studies views this as the most critical function a fiduciary performs.

Source: 401kadvisor.us, April 2014

The Investment Policy Statement: Putting It in Writing

Abstract: Among a plan sponsor's responsibilities is to offer sound investments options to participants. Your plan's IPS is a double win on that count. It not only helps you think through how best to fulfill this important fiduciary duty, it also is one of the most powerful tools available for protecting yourself against fiduciary liability by formally documenting the process you're using to select and monitor your plan's investment selections. What are some of the key components?

Source: Alliantwealthadvisors.com, January 2014

Video: Are You Following Your Investment Policy Statement?

Abstract: What's better? Having an investment policy statement and not following it or not having an investment policy statement? Watch this quick video to find out.

Source: Erisasunscreen.com, December 2013

The Importance of the Investment Policy Statement

Abstract: The purpose of the investment policy statement is to document the investment plan and provide guidance for consistent, informed decision-making. It should be the central component of all advisory relationships, serving as both a roadmap to investment success and a barrier to the kind of bad investor behavior that can derail even the best laid plans.

Source: Investmentnews.com (free registration may be required), October 2013

The Investment Policy of the Future

Abstract: In this white paper, authors discuss how to develop an investment policy that aligns with your objectives and makes possible a more adaptable, nimble investment strategy. They propose some new ways to approach your investment objectives and asset allocation process. With the understanding that change can be difficult, they demonstrate how these changes can be beneficial not only in the short term, but in terms of creating a solid framework from within which your investment strategy can adapt to a shifting landscape.

Source: Arnerich Massena, September 2013

Fiduciary Checklists for Monitoring Major Risks to 401k Investments

Abstract: This article presents two checklists focused on the monitoring of 401k plan investments. The first takes a macro view, itemizing common issues that warrant a deeper dive for fiduciary understanding. The second relates solely to target date funds, in order to assure attention to eight items that the Department of Labor identified in a notice issued earlier this year.

Source: Erisacloud.com, April 2013

IPS's Need Specific Criteria When it Comes to TDFs

Abstract: Fred Reish notes that in reviewing investment policy statements of 401k and 403(b) plans, he has observed that many lack specific criteria for the selection and monitoring of target-date funds, or, if there are criteria, that they are overly broad and not particularly helpful to plan committees. While there are no clear legal guidelines to direct this process, Fred suggests some best practices.

Source: Plansponsor.com, December 2012

Sample Investment Policy Statement

Abstract: This is a sample IPS prepared by DWS Investments. It is a Word format document.

Source: DWS Investments (Word Document), October 2012

Sample Investment Policy Statement for a 401k Plan

Abstract: Only about half of all defined contribution plan sponsors have a written investment policy statement, according to studies by PSCA, Hewitt Associates and BARRA Rogers Casey. How can a plan sponsor select and monitor investment options or ensure Procedural Prudence without having an investment policy? In our opinion, they can't.

Source: 401khelpcenter.com, September 2012

Sample Investment Policy Statement

Abstract: The purpose of an Investment Policy Statement (IPS) is to assist the Investment Committee in effectively supervising, monitoring and evaluating the management of the Retirement Plan. This is a sample IPS prepared by Fi360.com.

Source: Fi360.com, September 2012

Take Control of Your 401k Plan With an Investment Policy Statement

Abstract: An Investment Policy Statement is a soup-to-nuts blueprint for the plan, its administration and its ongoing maintenance. But a good IPS doesn't stop there. It is a living, breathing document that shifts with long-term investment market trends and changes in employee demographics. It should be constantly re-evaluated and slavishly adhered to.

Source: Smart Business, July 2012

Eight Considerations When Reviewing Your Investment Fund Lineup

Abstract: At least once a year plan sponsors and other plan fiduciaries should take a critical look at their investment fund lineups. Here are eight items that are normally considered during a review.

Source: Employee Benefit News, July 2012

Why the Traditional Structure of Investment Policy Statements Won't Work for 401k Plan Sponsors

Abstract: In outlining the traditional structure for an IPS, the CFA Institute retains language from the era preceding the dominance of 401k plans in the institutional realm. While this structure certainly continues to work well for private individuals and single portfolio institutions, it represents an awkward construct for 401k plans.

Source: Fiduciarynews.com, May 2012

Do Your Fiduciaries Follow Your 401k Plan's Investment Policy Statement?

Abstract: Although a good IPS can be a defense in a lawsuit asserting breaches of fiduciary responsibility, it is a double-edged sword -- it can be very expensive to depart from it. Investment fiduciaries need to make sure that they have read and understand the IPS.

Source: Osler, Hoskin & Harcourt LLP, May 2012

Court Finds a Neglected IPS Can Be Costly

Abstract: The importance of maintaining and adhering to a sound investment policy statement is widely embraced as the guiding document from which other fiduciary responsibilities flow. At times, though, it is instructive to see how the courts reinforce the importance of this concept in a judicial review.

Source: FI360.com, April 2012

Creating a Successful Investment Option Due Diligence Process

Abstract: Building and monitoring an investment array fopr a qualified retirement plan is a complex task with numerous difficult decisions. Great care should be taken when assembling the team that oversees the array. White paper shows employers what to look for in a service provider's due diligence process.

Source: Securian, April 2012

Why You Need a Dynamic Investment Policy Statement

Abstract: A Dynamic Investment Policy Statement (IPS) can derisk your pension plan without your investment committee spending a great deal of time and missing opportunities to lessen risk. It's as simple as that.

Source: Vanguard, May 2011

Is Your Investment Policy Statement Still Using Outdated Language?

Abstract: If you're a 401k Plan Sponsor, take another look at your IPS. Are your investment goals updated to reflect the language of the modern investment environment, or is your IPS just a travel agent with no clue about Tahiti?

Source: Fiduciarynews.com, May 2011

Investment Policy Statement Checklist and Sample

Abstract: This checklist is intended to provide a framework to assist fiduciaries of qualified retirement plans, in consultation with their counsel and/or investment advisor, in developing and drafting an investment policy statement for their plan.

Source: Putnam Retirement Services, March 2011

Investment Policy Statements and QDIAs

Abstract: Many investment policy statements either don't have provisions for qualified default investment alternatives or, if there are provisions, have inadequate descriptions of the selection and monitoring process. While the law does not contain specific rules about the issues that plan sponsors should evaluate in selecting and monitoring target date funds, the points addressed in this article are a good starting place.

Source: Drinker Biddle & Reath LLP, April 2010

The Duty to Remove Investments

Abstract: It is commonly accepted that fiduci­aries of participant-directed plans have a duty to select, monitor, and remove investments prudently. The threshold question is whether a fiduciary's duty to remove investments applies to individual investments or whether the decisions are judged on the basis of the investments in the aggregate.

Source: Plansponsor.com (free registration may be required), December 2009

Static vs. Dynamic Investment Policy: Matching Asset Management to Investor Risk Preferences

Abstract: This article outlines several asset management approaches and discusses the importance of aligning the approach with investor risk preferences. If the investment policy ignores this critical "calibration," there is little hope that the investor will be able to maintain the policy during recessionary periods.

Source: Schultz Collins Lawson Chambers, January 2009

Value and Prudent Process: Redefining Both Terms in Light of the Recent 401k Fee Class Action Lawsuits

Abstract: In this paper, a new perspective on "prudent process" and "value" will be introduced, and the traditional definitions will be challenged. Fiduciaries will also be shown the type of quantitative data they need to objectively determine if their "prudent process" is actually delivering "value" to their participants.

Source: Investment Horizons, June 2007

Value and Prudent Process: The Diffusion of Responsibility and Its Effect on Value

Abstract: If the recent wave of lawsuits over 401k fees launched by Schlichter, Bogard, and Denton did not catch the attention of 401k fiduciaries, Roger Ibbotson's recent paper, "National Savings Rate Guidelines for Individuals," should. In this paper, the authors quantified why the average boomer's retirement will most likely be financially strapped.

Source: Investment Horizons, June 2007

Prudent Investment Process

Abstract: This just released report from November 2006 was produced by the 2006 ERISA Advisory Council's Working Group on Prudent Investment Process. The desired result of the Working Group was to discover and present matters that would enhance the ability of fiduciaries to execute their responsibilities under ERISA.

Source: U.S. Department of Labor, May 2007

Selecting and Monitoring Investment Professionals

Abstract: This article addresses salient legal issues confronting plan fiduciaries today in connection with the investment of employee benefit plan assets.

Source: Benefits & Compensation Digest, May 2005

Investment Selection and Monitoring Best Practices

Abstract: In this article, the author contends that, due to changes in the investment process, regulatory and legal environments, the procedures for oversight used by many plan sponsors may no longer be prudent. The article sets out a best practices approach to process, asset allocation and investment monitoring, including 10 analytics plan sponsors should focus on, intended to mitigate fiduciary liability for plan sponsors and improve the investment choices made available to participants.

Source: 401khelpcenter.com, January 2005


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