Investment policy statements (IPSs) are commonplace among retirement plans — with around 83% providing one. And that number tends to be even higher among bigger plans. Financial powerhouse Goldman Sachs is one of the larger employers that doesn’t utilize an IPS. In fact, this was the subject of a recently dismissed lawsuit by a former Goldman employee, whose attorney alleged that the company violated ERISA by, among other things, failing to adopt an IPS.
The federal judge in the Goldman Sachs case reaffirmed that “the Department of Labor has never taken the position that an IPS is required to satisfy a fiduciary's duties.” Moreover, the absence of an IPS was not, in and of itself, sufficient cause for the case to proceed. Nonetheless, that doesn’t undercut the potential advantages of establishing an IPS.
Roadmap for your plan.
An IPS offers guidelines to assist advisors and fiduciaries in selecting and monitoring investments — and provides documentation that serves as an objective framework for various aspects of plan decision-making. In essence, it helps to create evidence of a prudent process.
Clarification of roles.
By clearly outlining the roles and responsibilities of parties involved with the plan’s investment process, an IPS can help increase plan oversight and accountability. And it offers guidance that can assist both advisors and fiduciaries.
An aid in communication.
An IPS can help onboard new committee members more quickly and efficiently. It’s also a useful vehicle to provide employees with information about the plan’s investments and management.
A tool for improvement.
The creation of an IPS requires thoughtful consideration of the plan and investment details. This means that during the process, you may uncover plan weaknesses or find opportunities for improvement that you might not have otherwise.
Potential risk mitigation.
In addition to providing valuable information to aid in plan management, having an IPS could help protect your organization. It offers an extra level of oversight in the form of a paper trail that can serve as documentation that you’re upholding your fiduciary duty should allegations of impropriety arise.
Talk to Your MCF Plan Consultant About the Advantages of an IPS
Your retirement plan consultant can provide more information about an IPS and how it can assist key stakeholders within your organization and help strengthen your plan. While simply having an IPS can’t fully insulate you from the risks of an ERISA lawsuit, it may offer an additional layer of protection, clarify plan decision-making, and help your organization better define and meet business objectives.
MCF is pleased to provide plan sponsors with an investment policy statement template that is easily customizable and available for client adoption or use.
IMPORTANT DISCLOSURE INFORMATION
MCF Advisors, LLC (“MCF”) is a SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. More information about the adviser can also be found by visiting: https://adviserinfo.sec.gov/. This is not intended as an offer or solicitation with respect to the purchase or sale of any security. MCF may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this blog/newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog/newsletter serves as the receipt of, or as a substitute for, personalized investment advice from MCF. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MCF is neither a law firm nor a certified public accounting firm and no portion of this content should be construed as legal or accounting advice. A copy of MCF’s current written disclosure statement and customer relationship summary (“Form CRS”) discussing our advisory services and fees continues to remain available upon request. The scope of the services to be provided depends upon the needs of the client and the terms of the engagement. If you are a MCF client, please remember to contact MCF, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services.