Investment Policy Statement

Although investment policy statements are not required by the U.S. Employee Retirement Income Security Act (ERISA), it is highly recommended that every retirement plan have one.  The investment policy statement is designed to guide the sponsor's retirement plan committee as it decides, with the plan's investment advisor, on investment options to include in the plan, and to evaluate the performance of those investments over time.  Having an up-to-date investment policy explained in a formal policy statement and, more importantly, following it, can go a long way to help plan sponsors show that they followed a prudent process for choosing and evaluating plan investment options.  This will in turn help protect the plan committee or other fiduciaries responsible for investments by setting out procedures for fulfilling their fiduciary responsibilities.

Overall, the investment policy statement should spell out:

  • The plan's overall investment philosophy and investment objectives.
  • Who is responsible for choosing and monitoring the plan's investments.
  • How the plan will construct its investment menu and how it determines what investment options to offer, including what asset classes are included and why.
  • How the plan will evaluate the investment funds offered, including the frequency and criteria to be used.
  • Under what circumstances the plan will remove investment funds or managers and how that process will be managed.

Generation Capital Management works directly with plan sponsors in helping create, recommend, monitor and follow an investment policy statement appropriate for their retirement plan.  If an IPS has been created, we will review it and make recommended changes necessary to bring it up to date.