An IPS is NOT required ... but if you have one it IS required that you follow it

Confused yet?

When you create an Investment Policy Statement you are creating a plan document. While it is not required that you ever create one, it is almost always the first plan document that the Department of Labor auditor asks for when paying you a visit. Having an IPS shows prudence and demonstrates that you have a process in place. Seems like a good idea, right?

But having one and not following it sure doesn't make the right first impression with that DOL auditor. It might almost be better to not have one than to have one and not follow it.

How often do you review it?

According to one recent study by Deloitte, 30% of respondents admitted that they had not reviewed their IPS in more than a year and 5% said it had been more than three years.

We recommend reviewing it annually and having everyone on the Retirement Plan Committee sign it to demonstrate that it was reviewed and adopted. An executed copy should always be on file to hand the auditor...if you have an IPS.

So what's the take away?

If it's dangerous to have one and not follow it should the Retirement Plan Committee simply avoid having one?

NO.

The Retirement Plan Committee should adopt an Investment Policy Statement just as they should adopt an Education Policy Statement and a Disclosure Policy Statement. The Committee should make sure that it's not too restrictive. And the committee should just mark the calendar to review it annually. Not super difficult. Just send yourself an invite through Outlook. It's prudent to have one, it's considered a Best Practice to have one, and it's just the right thing to do. But please make sure that you look at it occasionally and review and sign it at least annually.

If you have concerns about your IPS or if you’re not even sure what an EPS or DPS is, much less whether or not you have one, click here to receive an article explaining this further.