PLANSPONSOR - October 2017 - 38

THE BOTTOM LINE
Best Practices for the IPS
A
lthough not a required document,
an investment policy
statement (IPS) is now in place
with 65% of plan sponsors, according to
the 2016 PLANSPONSOR Defined Contribution
(DC) Survey. If the document
exists, a best practice for the retirement
plan committee is to review the statement
regularly, to see whether it needs updating
and to confirm that the committee
itself followed the stated process during
the preceding year.
According to experts from Strategic
Benefit Services (SBS), Rensselaer,
New York, employers should begin
either crafting or reviewing their IPS
by gathering any plan documents that
pertain to investing. At a minimum, the
experts wrote in a blog post, these may
include trust documents, summary plan
descriptions (SPDs), written minutes
of committee meetings, current vendor
service agreements, investment performance
reports, enrollment reports, participant
educational material, procedural
manuals and Form 5500 paperwork.
These documents should help plan
sponsors determine exactly what process
and detail should be contained in the
formal IPS, SBS says, concluding that,
especially in today's challenging environment,
efficiency and litigation protection
are easier to attain when the IPS is " a
well-articulated document " designed to
promote careful investment selection and
ongoing investment evaluation, " which
are fiduciary obligations. "
Also important, the experts stress, is
striking a balance between specificity and
flexibility in the IPS.
This message is echoed by fi360, a
firm, headquartered in Pittsburgh, that
specializes in fiduciary compliance. A
draft IPS shared by the firm is only eight
pages long and allows flexibility for plan
38 PLANSPONSOR.com October 2017
Investment policy statements should reflect DC plan realities
sponsors, even as it seeks to increase
discipline.
The document opens with a short,
simple list of the investment options the
plan contains. This is followed by nearly
two full pages describing in general-but
still very careful-terms the objectives
and purposes of the plan. This section
names no specific funds or products, nor
does it identify any hard-dollar goals or
step-by-step processes for the plan or its
participants. Next, the IPS very cautiously
enumerates what responsibilities lie with
Art by Paige Vickers
the various vendors and with the plan
sponsor, focusing much more on naming
what these duties are than expressing
exactly how they must be met.
When it comes to the actual investment
monitoring process detailed in the
draft IPS, the attempt at flexibility is especially
clear, indicating simply that " the
performance of the investment options
will be monitored on an ongoing basis, and
it is at the committee's discretion to take
corrective action by replacing a manager if
[it deems this] appropriate at any time. "
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PLANSPONSOR - October 2017

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