PLANSPONSOR - December/January 2021 - 33

ADMINISTRATION & GOVERNANCE | INVESTMENTS
Striking the Right Balance
An IPS provides guidelines and operating procedures
O
f the mountain of paperwork
that goes into managing a
defined contribution (DC) retirement
plan, the most crucial piece is the
investment policy statement (IPS). Or
so says Ed McIlveen, research director
at Francis Investment Counsel LLC, in
the Milwaukee suburb of Brookfield.
" Everything is linked to the IPS in some
way, bringing all of the plan documents
together, centralizing the discussion on
how the work is delegated and the results
are monitored, " he explains.
Investment policy statements are not
a requirement under the Employee Retirement
Income Security Act (ERISA), but
they are pretty standard equipment: The
2020 PLANSPONSOR Defined Contribution
Plan Industry Report shows that 70%
of all plans in the DC survey-and about
90% of those with assets greater than
$100 million-maintain an IPS. In their
own surveys, consultants at Callan report
a prevalence of about 90% as well.
What about the other 10%? " DC plans
without an IPS are few and far between, "
says Greg Ungerman, leader of Callan's
DC practice, in San Francisco. " And it's
hard to say why they would not have one,
because the IPS is useful in bringing
together members of an investment
committee who might not ordinarily work
together, and establish a framework. "
While ERISA may not require an IPS,
the Department of Labor (DOL) will still
expect one to be produced for plan examinations.
" The DOL always asks to see the
IPS in an investigation, as well as minutes
to the meetings of investment committees, "
says Bruce Ashton, a partner at
Art by Antonio Uve
Faegre Drinker Biddle & Reath LLP, in the
law firm's Los Angeles office.
IPS Basics
Drafting an IPS draws on both art and
science. More expansive than a haiku, less
detailed than a flight plan, an IPS should
provide a general guide for a plan's investment
fiduciaries. " It's designed to say
'Here are the principles on which we will
select our investments,' " Ashton says. " My
advice is always to get rid of any 'shalls' or
'shall nots,' and instead indicate it's meant
to serve as a guide and not restrict the
investment committee's discretion. "
" The IPS might say, 'The committee
is responsible for reviewing the plan's
investment structure, to understand what
categories of funds-growth or value,
company size, regions and so on-should
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PLANSPONSOR - December/January 2021

Table of Contents for the Digital Edition of PLANSPONSOR - December/January 2021

The Truth About Plan Lawsuits
2020 PLANSPONSOR Best in Class DC Providers
Administrative Assistance
Striking the Right Balance
Electronic Upgrade
PLANSPONSOR - December/January 2021 - Cover1
PLANSPONSOR - December/January 2021 - Cover2
PLANSPONSOR - December/January 2021 - 1
PLANSPONSOR - December/January 2021 - 2
PLANSPONSOR - December/January 2021 - 3
PLANSPONSOR - December/January 2021 - 4
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PLANSPONSOR - December/January 2021 - 11
PLANSPONSOR - December/January 2021 - The Truth About Plan Lawsuits
PLANSPONSOR - December/January 2021 - 13
PLANSPONSOR - December/January 2021 - 14
PLANSPONSOR - December/January 2021 - 15
PLANSPONSOR - December/January 2021 - 2020 PLANSPONSOR Best in Class DC Providers
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PLANSPONSOR - December/January 2021 - Administrative Assistance
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PLANSPONSOR - December/January 2021 - Striking the Right Balance
PLANSPONSOR - December/January 2021 - 34
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PLANSPONSOR - December/January 2021 - Electronic Upgrade
PLANSPONSOR - December/January 2021 - 37
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