Implementing an Investment Policy

Implementing an Investment Policy

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

Making sound investment-related decisions for an employee benefit plan is an essential part of fiduciary duty.  A good investment policy provides a roadmap for a fiduciary agent of where the plan is expected to go.  By providing clear procedural guidelines, plan sponsors can make better decisions related to the selection and ongoing monitoring of investment options and service providers under the plan.

An investment policy should include:

The purpose of the investment policy – what is the objective of the new or updated policy?

The roles and responsibilities of those involved – who is involved in the management of plan assets and administration of the plan?

The investment philosophy of the plan – what type of investments should be made available to employees?  What types should be avoided?

The criteria to select and monitor investments – what criteria for the selection of investment options will be used?  Are there minimum performance requirements that must be met before an investment option is replaced?

The current investments offerings and their related performance – what performance benchmark(s) are used when reviewing the performance of current investment options?

As always, plan sponsors should consult their own counsel and designated advisor, if applicable, for specific guidance on their particular circumstances when implementing new policies.

Jessica Puckett, CPA, CFE