View model investment policy statement and other IPS documents

Chicago (August 24, 2001) – The Profit Sharing/401(k) Council of America (PSCA) is pleased to offer another solution to defined contribution plan sponsors by providing a best practices illustration of an investment policy statement for plan sponsors wishing to develop a written investment policy statement for their plan. PSCA has also developed a white paper describing the role of a written investment policy statement in the defined contribution investment process and discussing the advantages and concerns with adopting a written investment policy statement. "A written investment policy statement establishes criteria and benchmarks that are critical to the successful management of defined contribution plan investments’" according to Allan W. TeRonde, President of American Grinding & Machine Co. The model and the white paper are available here.

Approximately half of defined contribution plan sponsors have described their investment decision making procedures in a written form called an investment policy statement, according to studies by PSCA, Hewitt Associates, William M. Mercer and BARRA Rogers Casey. This contrasts with the situation for defined benefit plans where such investment policy statements are practically universal. PSCA believes that adoption of a formal investment policy process, and documenting that process, will help sponsors manage their fiduciary liability and ease the Department of Labor plan audit process. Also, implementing an investment policy

• Helps clarify the plan’s investment-related goals and objectives.
• Provides a framework for evaluating investment performance.
• Aids in clear communication of plan investment policy to participants.
• Ensures continuity in decision making as plan fiduciaries change.
• Protects the sponsor from inadvertently making capricious or arbitrary decisions.
• Helps the sponsor manage pressure for change generated by participants, vendors or the media.

"In many ways the 401(k)/defined contribution plan has come of age as it reaches its 20th year of existence," said Bob Richey, Senior Vice President of Investments at America Express Retirement Services. "A sound investment policy is a mature and practical foundation for managing a plan’s investment options with today’s nearly limitless supply of fund choices."

PSCA was assisted in the development of the white paper and model statement by the following:

Robert Richey, American Express Financial Advisors Inc.
Donna Winn, Oppenheimer & Co. Inc.
Drew Lawton, Fidelity Investments
Alex Nelson, Putnam Investments Inc.
Stacy L. Schaus, Hewitt Associates LLC
Martha Papariello, The Vanguard Group of Investment Cos.
David Feldman, Metlife Retirement and Savings
Ravi Venkataraman, William M. Mercer Inc.
Brian Gaffney, Neuberger & Berman Management Inc.

View model investment policy statement and other IPS documents