Eight Steps to Retirement Plan Success

Identify those individuals who are responsible for the decisions of the plan to ensure they know their duties and responsibilities and that they receive training on their roles and responsibilities. They should acknowledge a commitment to meeting their fiduciary responsibilities. Documenting the prudent process used to make plan decisions helps fiduciaries, future plan decision makers and regulators understand the rationale for those decisions.

A critical fiduciary function is to document the selection of a plan’s investment options. Most plans use an Investment Policy Statement (IPS) to document this process. An IPS is a written document with the purpose of providing meaningful direction and guidance for trustees and investment professionals regarding the selection and management of the plan’s assets based on established and documented investment goals and objectives. Where fiduciaries lack expertise in certain areas, like investments, they should engage objective experts to help with decisions in those areas.

While having a formal Investment Policy Statement is not required, ERISA does stipulate that a well-articulated, documented procedure for investment selection and ongoing investment evaluation is a fiduciary obligation. When used properly, this document can limit liability, identify acceptable types of investments and benchmarks, provide consistency in investment comparison and detail the responsibilities of the plan service providers. The statement of investment policy must be referred to both by fiduciaries who manage plan assets, and fiduciaries who appoint and monitor those who manage plan assets. An evaluation process should be in place to ensure it is used properly. 

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