So, like all policies that your company may have—how do you actually prove that you are following your plan’s Investment Policy Statement (IPS)? If the first question a Department of Labor Auditor asks is “where’s your IPS,” documentation that you are following your IPS is likely to be the second.
As a plan sponsor, you should be able to clearly demonstrate that you are monitoring and tracking all aspects of the plan’s IPS on an ongoing basis. You should also be able to show that you document your actions. The IPS should apply the same methodology that went into the initial section of funds, to the replacement of funds that don’t meet the IPS standards. In this way, the plan will have a consistent method that can be followed by whomever is on the Investment Committee at any given time. It’s a process that is the essential aspect to the IPS. No one wants to be in a plan that’s negligent in its duties, so having an IPS that is written and documented is critical.
When you follow the process, participants will not only know, but appreciate that you are providing a true benefit to them. Remember, it’s not just your money in the plan—as a fiduciary, you are responsible to each and every participant. You must keep their best interests ahead of your own—and you must be able to prove that you’re doing so.