PSCA Offers Investment Policy Template

August 24, 2001 ( - Plan sponsors can get a head start on crafting a written investment policy statement for their plans, courtesy of the Profit Sharing/401(k) Council of America (PSCA).

The PSCA has also developed a white paper describing the role of a written investment policy statement in the defined contribution investment process and discussing the implications of adopting such a statement.

PSCA notes that according to various studies by PSCA, Hewitt Associates, William M. Mercer and BARRA Rogers Casey, only about half of all defined contribution plan sponsors have described their investment decision-making procedures in an investment policy statement. That stands in stark contrast with the almost universal adoption of such statements by defined benefit plan sponsors.

The PSCA believes that adoption and documentation of a formal investment policy process will help sponsors manage their fiduciary liability and ease the Department of Labor plan audit process.

In addition, according to the PSCA, implementing an investment policy:

  • clarifies the plan’s goals and objectives,
  • provides a framework for performance evaluation,
  • assists with the clear communication of plan investment policy to participants,
  • ensures continuity in decision making as plan fiduciaries change,
  • protects the sponsor from inadvertently making capricious or arbitrary decisions,
  • helps the sponsor manage pressure for change.