Series 65: Investment Policy Statement

Investment Policy Statement

To help further limit an employer’s liability as a fiduciary, employers can incorporate an investment policy statement (IPS) into their retirement plan. An IPS is a document that outlines a retirement plan’s investment goals and strategies, and serves as a guide for what to invest in, as well as a means of assessing how well the fiduciary has met the policy’s investment goals.

In addition, an IPS outlines how many of the ERISA Section 404(c) requirements are met, including how an employer screens and selects the underlying investments and investment managers, monitors performance, limits expenses in the plan, etc.

Typical investment policy statements include:

• • Investment goals and objectives
• • The way the plan will meet these objectives
• • Selection process for the investments within the plan
• • The way that the goals and investments will be measured, monitored, and reviewed
• • An asset allocation and a description of when the assets will be rebalanced
• • Any limitations on what can be invested in

Investment policy statements are one of the first things that the U.S. Department of Labor looks at when it performs an audit of any ERISA-covered plan. During the audit, the Department of Labor reviews how an employer’s retirement plan was managed and administered to see if it deviated from its written investment policies. Comp