COLLECTED WISDOM™ On Investment Policies

Establish an Investment Committee - Summary: Author explains how plan sponsors and plan fiduciaries can limit liability by forming an investment committee with a clearly defined process. Located at: fi360.com , December 2007. Click on headline for full article.

Value and Prudent Process: Redefining Both Terms in Light of the Recent 401k Fee Class Action Lawsuits - Summary: 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. Located at: Investment Horizons , June 2007. Click on headline for full article.

Value and Prudent Process: The Diffusion of Responsibility and Its Effect on Value - Summary: 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. Located at: Investment Horizons , June 2007. Click on headline for full article.

Prudent Investment Process - Summary: 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. Located at: U.S. Department of Labor, May 2007. Click on headline for full article.

401k Investment Policy Statement Checklist and Sample - Summary: A framework to assist plan sponsors in drafting an investment policy statement. Located at: Putnam , November 2006. Click on headline for full article.

Selecting and Monitoring Investment Professionals - Summary: This article addresses salient legal issues confronting plan fiduciaries today in connection with the investment of employee benefit plan assets. Located at: Benefits & Compensation Digest , May 2005. Click on headline for full article.

Investment Selection and Monitoring Best Practices - Summary: 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. Located at: 401khelpcenter.com, January 2005. Click on headline for full article.

Model Investment Policy Statement - Summary: PSCA developed this model investment policy statement for plan sponsors wishing to develop a written investment policy statement for their plan. Located at: Profit Sharing/401k Council of America (free registration required), June 2004. Click on headline for full article.

The Investment Policy Statement: A Shield Against Fiduciary Liability in 401k Plans - Summary: While sophisticated investors know and expect market downturns, many participants in 401k plans were caught by surprise. As a result, some plan sponsors are concerned about unhappy participants bringing lawsuits. Fortunately, ERISA does not make the plan sponsor a guarantor of good investment performance. What it does require is a good decision-making process for choosing investments or, in plans with participantdirected investments, choosing investment options. This article describes the basic ERISA requirements for selecting investments or investment options and the important role a written investment policy statement can play in satisfying those requirements. Located at: Adams and Reese LLP , April 2004. Click on headline for full article.

Does Your Plan Need an Investment Policy Statement? - Summary: Is it safe to assume, then, that if the committee makes the investment policy decisions, but does not record those decisions to writing, it has complied with ERISA? Located at: Reish Luftman Reicher & Cohen, November 2003. Click on headline for full article.

Does Your Plan Need An Investment Policy Statement? - Summary: It depends. If your goal is to provide quality investment options to your participants consistently, then the "best practice" is for a plan to have an investment policy statement (IPS). However, ERISA does not require that plans adhere to best practices, nor does it make any reference to investment policy statements. While the Department of Labor has acknowledged that there is no explicit ERISA requirement, guidance from the DoL makes it clear that 401k investment fiduciaries must make investment policy decisions for their plans, whether reduced to a written document—an IPS—or not. Located at: Plansponsor.com (free registration required), November 2003. Click on headline for full article.

The Written Investment Policy Statement - A White Paper - Summary: It is the purpose of this paper to provide plan sponsors with the advantages and disadvantages of adopting a written description of the investment process for their defined contribution plans. It also provides a discussion of what might be included should they choose to implement an investment policy statement. An example of an investment policy statement is attached. Located on: The Profit Sharing/401k Council of America. Click on headline for full article.

Sample Investment Policy Statement for a 401k Plan - Summary: 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. Located on: 401khelpcenter.com, April 2003. Click on headline for full article.

Investment Policy Statements for Defined Contribution Plans - Summary: Numerous fiduciary issues make investment policy statements an invaluable tool for the effective management of participant-directed defined contribution plans. However, many plan sponsors and vendors neglect to develop appropriate policy statements. This article lists the most important components of an effective investment policy statement, and suggests how a plan sponsor might go about developing an investment policy. Located on: Schultz Collins. Click on headline for full article.

Using Investment Policy To choose Asset Classes And Investment Funds - Summary: Sponsors of defined contribution plans face a series of complex questions when selecting investment options. Should funds be selected based on popularity? Should plan participants have a voice in the selection process? What responsibilities does ERISA impose for prudent selection processes? How can investment theory and generally accepted portfolio design principles assist with the selection process? Located on: Schultz Collins. Click on headline for full article.

Fiduciary Responsibilities in Selecting Investment Advisors - Summary: The decision to offer investment advice is a fiduciary act, as is the selection and retention of a specific investment advisor. Thus, even though an investment provider (for example, an insurance company or a mutual fund family) may offer access to one or more investment advisory firms as a part of its investment package, the decision to use the investment advisor must be made by the responsible plan fiduciaries—that is, by the corporate officers who serve on the plan committee and who oversee the operation of the plan. And, in making that decision, they are responsible under ERISA to act “prudently.” That raises the obvious question: What must the officers do to be prudent? Located on: Reish Luftman Reicher & Cohen, April 2001. Click on headline for full article.

ERISA §404(c): The Requirement for a Broad Range of Investment Alternatives. - Summary: Most people think of 404(c) as requiring at least three diversified investment alternatives. That is one of the broad range requirements; however, there are two more -— and all three must be satisfied to get 404(c) protection. Located on: Reish Luftman Reicher & Cohen, May 2000. Click on headline for full article.

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