401k Investment Policy Statement - Free Sample Template
Posted on Wed, Sep 01, 2010
As I had mentioned in my previous post Does Your 401k Plan Have an Investment Committee?, it is important to establish a 401(k) Investment Committee to oversee the process of monitoring and reviewing funds. The committee needs to have written guidelines to follow when carrying out the fiduciary duties of monitoring plan investments. The Investment Policy Statement (IPS) is a document used by the committee to ensure that guidelines are followed.
So where do you start? If you have an outside professional investment advisor, he/she should be able to provide to you a sample template of an IPS, or you can use this Sample Investment Policy Statement. Note that this sample template is just a starting point, and not intended to replace the full version. The next step is for the committee to review and customize the written policy to meet your 401(k) plan’s needs. It is recommended that your legal counsel or investment advisor approves your final version of the policy.
An IPS will normally contain the following sections:
- The purpose of the IPS – to establish clear investment objectives and guidelines
- Investment Objectives – such as giving participants control over their own investment choices, and a diverse array of funds for them to select from
- Investment Guidelines – how the committee will select and evaluate funds to be included in the plan. Such factors for each fund would include general performance, performance compared to its “group of peers” in the same asset class, fund expenses, and other more complicated analytical metrics
- The procedure to be followed if a fund does not meet the acceptable guidelines over a period of time
It is a good idea to review the contents of the IPS on an annual basis, just to confirm whether any changes are needed to the 401k plan’s goals, procedures, and objectives that need to be changed along the way.