Investment Policy Statement

The Investment Policy Statement should be developed and updated. The IPS is not required by law but it is a document that regulators and the Department of Labor will review when they conduct an audit.

A carefully crafted IPS includes:

• Criteria to comply with the safe harbor provisions ERISA section 404(c) and state the intention to comply with it. Having a 404(c) compliant plan shields the plan sponsor from lawsuits brought by participants for losses on investments in the plan.
• Eligible investments should be outlined in order to provide appropriate investments for the plan.
• Prohibited Investments should be defined to not be allowed as an investment option in the plan
• Roles and responsibilities of the fiduciaries, investment committee, custodian, investment advisor, and investment manager. The IPS provides guidance and definitions.
• Investment option selection criteria. A defined investment selection process serves as a guideline for proper decisions.
• Investment option monitoring process. An important role is to monitor the investment suite in the plan. Reports are provided and reviewed to achieve this important task.
• Investment option replacement criteria. A process is important that provides an opportunity to replace investment options as needed.