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While the sponsor of a qualified retirement plan is not required by law to have a written Investment Policy Statement (IPS) for its plan, per se, the Employee Retirement Income Security Act of 1974 (ERISA law) is clear that plans must "provide a procedure for establishing and carrying out a funding policy in a method consistent with the objectives of the plan" [ERISA §402(b)(1)].
The language of the IPS must be “just right,” neither too loose nor too strict. It should outline the actual steps that are part of a fiduciary process, while not being overly detailed or restrictive so as to preclude flexibility on the part of the fiduciaries. Avoid the use of inflexible words like “must” and “shall” when writing an IPS. Because there is no formal requirement to have a tangible IPS, there is no prescribed format or template for creating the statement.
Download the following checklist, which contains questions to help design an effective Investment Statement Policy.