While the rate of response was a bit short of the ‘normal’ pace, we were pleasantly surprised to hear that nearly 87% of our survey respondents have an investment policy. One satisfied ‘customer’ said, ‘We do have an investment policy for our 401(k) plan developed by our attorney, consultant and committee. We do follow its guidelines, in fact, we are considering investment option changes based on the criteria established in the policy. However, the most important thing writing the policy accomplished (other than affording the company some protection from DOL audits and participant lawsuits) was bringing together members of senior management to formally review the performance and operation of the plan on a strict quarterly basis.’
However, probably half of the 13% currently without one would change that, if it was up to them, according to the responses. One summed it up nicely, ‘We have an unapproved DC investment policy which is too general to be of real use. Some people (like me) feel there should be more detail and others want to keep it general to allow flexibility. I will be working on this more this year.’
‘Yes we have an investment
policy and its written on paper.
It provides guidance best
when its folded into an airplane.’
Nearly two-thirds of our respondents said that the investment policy in place for their defined contribution plan was a valuable, if not integral tool, in their management of the plan’s investments. However, a number of readers seemed to feel trapped between a policy that was too general to be of real use – or one that was too specific for the comfort of their legal counsel. For example, ‘Investment policy has been in “draft form” for over a year. Model policy from recordkeeper/investment manager was too detailed, according to our lawyers.’
And, as another noted, ‘The “policy” was simply a form letter provided to us by our plan provider. We simply put the number of funds we offer in the plan, put our name on the top and had its approval buried deep within a Board of Directors resolution somewhere. Any substantive information and guidance we need we get directly from our plan provider (that is why we are paying all of those fees right?!)’
However, of those who took the time to respond, handing out minutes to plan participants is a notion whose time has not yet come.
Oh, and I would be remiss if I didn’t share this week’s EDITOR’S CHOICE : ‘Yes we have an investment policy and its written on paper. It provides guidance best when its folded into an airplane.’
Thanks to everyone who participated in our survey!
If you’ve got either a sample investment policy or some
suggested criteria for same, please email them firstname.lastname@example.org(or drop me a note for other delivery options).
We may feature some of the best on the site – or in a
future issue of PLAN SPONSOR magazine.
The question was: Do you have an investment policy for your defined contribution plan? And is it worth the paper it's printed on in terms of guidance?
We have just re-created an investment policy, with real fund performance screens (quantitative and qualitative). We hired an independent firm, out of St. Paul to help us with it and to review our plan's fund line up. As they don't manage money, but consult to companies with DC plans, their insight was unbiased.
It has been a great experience and very worthwhile for our
participants. We won't provide participants with minutes of
trust committee meetings, but do expect to give them updates
or summaries where appropriate.
we are in the process of writing one. We have not discussed yet whether or not we will provide it to participants.
We have an unapproved DC investment policy which is too general to be of real use. Some people (like me) feel there should be more detail and others want to keep it general to allow flexibility. I will be working on this more this year.
Our Company has an Investment Committee that is comprised of Board members. Minutes are not provided to participants.
In these wild times of distrust among participants you absolutely must have an Investment Policy Statement. Without guidelines as to when to hire or fire managers in a defined contribution plan you are inviting lawsuits and participant discontent. You can never satisfy 100% of the participants but to leave the door open to interpretation on such matters is insane.
Yes, our DC plan has an investment policy. It is reviewed and used for guidance. We have an Investment Committee as well that meets once a quarter.
No, but it's under consideration.
We do have an investment policy for our 401(k) plan developed by our attorney, consultant and committee. We do follow its guidelines, in fact, we are considering investment option changes based on the criteria established in the policy. However, the most important thing writing the policy accomplished (other than affording the company some protection from DOL audits and participant lawsuits) was bringing together members of senior management to formally review the performance and operation of the plan on a strict quarterly basis.
We do not, as a matter of course, share the policy or minutes of the meeting with participants, but probably would if a participant asked. I have mentioned in meetings with participants that a policy and formal review exists and is taken quite seriously by senior management.
We have an investment policy. We review our funds every quarter but we do not distribute the policy or minutes to participants.
Yes we have an investment policy and its written on paper. It provides guidance best when its folded into an airplane.
As a service provider, we offer our clients an investment monitoring service that forms the core of an investment policy. We seek out mutual funds that meet the policy criteria, which usually requires that the plans offer multiple styles, multiple families and multiple managers which outperform their peer funds. This diversification comes at a cost, and I don't think most clients small to mid-size clients are willing to pay it or understand its value. Most plans, esp small ones, select from the funds offered and have no idea of how the funds rank relative to other similar funds. To me, this is much more critical than daily valuations and internet access, but gets less attention in bundled products. DB plan sponsors and larger DC plans select and monitor their managers with the policy, so it stands to reason that their performance should exceed smaller DC plan participants.
I encourage my clients to write investment policies and give them sample forms to follow. It has gotten a great deal easier to get them to do it since Enron!
Regarding investment policy statements. I had one in my last firm & found it very helpful as a guiding tool for the investment committee. We are working on one with my new firm. I believe they can guide the decision makers in an objective manner.
We do not have an investment policy for any of our plans. We have one 401(k), one money purchase and three DBP's. Every employee is covered by the 401(k), there is no matching there but the company makes contributions to either a DBP or the money purchase plan on each employees behalf depending on which group they belong.
There is often talk about the day of establishing an investment policy. To date there is none on any of them. The culture here is a little timid about actively managing and keeping all benefits more living in nature rather than stagnate. There is a small group trying to get the authority types to take this more seriously as it is an area we feel we can get some positive thoughts on from the participants.
I understand the importance of investment policies and
keeping up with market trends on the plans and would love to
that happen. However until the responsibility and
authority are better coordinated I prefer the stagnant plan
that was a little outdated the day it was installed.
Yes, both our plans have investment policies.
It is a struggle to get the Policy making body to revise it before they make changes to the rest of the plan. However it is helpful to explain to interested parties why the Plans are structured the way they are.
This past year we drafted and approved an "investment policy" for our 401(k) and Executive Deferred Compensation Plan. Fortunately, it was immediately filed never to be looked at again, as its only real purpose would be in the event our entire company was fired and the new employees needed to reestablish the retirement accounts.
The "policy" was simply a form letter provided to us by our plan provider. We simply put the number of funds we offer in the plan, put our name on the top and had its approval buried deep within a Board of Directors resolution somewhere. Any substantive information and guidance we need we get directly from our plan provider (that is why we are paying all of those fees right?!)
Seeing as there is no real relevance, there is no purpose
to distribute it to the masses and we chose not to (not that
they would read it anyway, and the two or three that would
find some question to ask us therefore bothering us with
unnecessary phone calls, e-mails and letters).
Yes, we have an investment policy. The policy is very comprehensive including fund selection guidelines, fund performance criteria, policy revision guidelines, etc. We report to our Employee 401(k) Committee quarterly regarding policy compliance, with a primary focus on performance
criteria (fund performance versus index and peer group).
Yes, we have a written investment policy. A copy is provided to all who are eligible to participate in the 401(k) plan. It basically is a protection for the company because it states that the participants are responsible for their own investment choices. We make this clear to all the participants. They do not get copies of investment review meeting minutes. However, in the case of any changes, they are informed well in advance.
Yes and the investment committee does use the investment policies to guide decisions
We do have a written investment policy for our Defined Contribution plan. No one ever looks at it. In my opinion, the only purpose it serves it so that we can say we have one.
Yes, we have a written investment policy for our defined contribution plan. It defines the funds that we offer and benchmarks that we measure the performance against. Is it worth the paper it is written on? Probably.
We do not have an Investment Policy statement for our DC Plan. All the consulting houses seem to be pushing them but the other members of the committee, all lawyers, are against establishing one. No participant has asked for one so we'll leave it alone for now.
Most of the time, NO. The investment policy is an agreed upon asset allocation between the plan sponsor and the Trustee/Investment Manager. It is usually outlined in a letter but not always. This asset allocation is reviewed annually to make sure it still is in line with the ages and expectations of the plan sponsor and the participants.
We encourage, advise investment policies. Most of the banks I have worked for in the past required that we keep a current signed copy of the investment policy in our plan document files.
Our plan does have an investment policy and it is monitored. The policy is not provided to participants nor are the minutes. The investments are reviewed each quarter.
we have investment policies for both the Defined Benefit and Defined Contribution Plans. They are actively adhered to. When we were switching investment advisors, more than one said they would not work with us unless we had such a policy. I think it is a critical component to my fiduciary responsibilities
Yes, we have an Investment Policy for our defined contribution (401k) plan, and it is worthwhile. As a member of our plan administrative committee, we often refer to it when reviewing the performance of our investment options. From time to time, we modify the policy to reflect changes in strategy, but nothing significant. Following Enron, I sense many committees are reviewing their policies, and altering as appropriate.
We have an investment policy for our $100 million 457 plan, it was provided by our TPA.. It was provided after the plan was established.
No we do not have an investment policy in place for the 401K. Since it is employee driven we feel it is not appropriate for the company to set the policy. However we have a process in place used to review the plan, performance and its options offered.
Strange - As it happens we just completed the process of developing a written investment policy for one of our 403(b) DC plans. This is an employee-funded, participant directed retirement investment plan with more than 100 specific fund options. The stated purpose of the document is to tell participants that the sponsor claims some shield from fiduciary responsibility under ERISA §404(c).
The intent of the plan sponsor is to make the range of investment options as broad and flexible as possible. This creates some conflict because the document promises, and §404(c) requires, some screening of the specific fund options, and considerably more participant communication than current. Having made this commitment, we must now figure out how to manage this.
While the policy document includes the text necessary to comply with §404(c) (e.g., a range of investment options from relatively low to high risk/return, relatively easy access for participants to "manage" their accumulation, etc.), I wouldn't bet my retirement that this would stand judicial scrutiny. This document will serve as a draft for investment policies for our separate-division, employer-funded 403(b) plans. We intend to include the policy in the SPDs. There is no intent to communicate minutes of the committee charged with deciding which specific funds to offer.
Our company has an investment policy, it:
does a great job of detailing the investment guidelines
for separately managed accounts in which we are involved
provides a general description of the retail funds we utilize and over which we really have only the ultimate discretion
details the minimum entry requirements for our consideration of any investment, years in operation, min assets, commitment to 401(k) industry, etc
lays out a performance review process and procedures for terminating under performing managers
We also have used the same document as operating guidelines with input from various disciplines, governing body, investment staff, human resources, legal, record keeper, custodian that set forth "rules of engagement" and explain roles and responsibilities.
It is not perfect, but it is an often referenced document.
Investment policy has been in "draft form" for over a year. Model policy from recordkeeper/investment manager was too detailed, according to our lawyers. We're not-for-profit --- no stock, which is good in this case. We do a formal portfolio with minutes annually.
yes we do have an investment policy and it does provide guidance with the help of an Investment advisor. We do not share the policy or minutes with participants. However, we do inform them that we do review the investment options with the help of an Investment Advisor and make changes as appropriate.
I've been recommending for the last 3 years that an investment policy be developed for the company's defined contribution plans. We have a policy for the defined benefit plans but the Investment Committee does not see a need for one for the DC plans.
We do have a written investment policy and it's requirement that offered funds must perform in the top 50% of their peers has been followed over the past four years.
We have a policy and no we don't provide it or minutes from the Committee meetings to participants. An interesting idea, will be interested in what others say and will give some thought to it for our organization's future.
We have a well-defined Investment Policy for our DC plan and it is definitely worth the paper it is on. It is a great tool for us.
Here are the elements we typically include in a client's 401(k) Plan IPS:
Components of an Effective IPS
Evaluation of plan and participant needs
Statement of investment objectives and goals
Standards of investment performance/benchmarks
Classes and styles of investment authorized
Diversification within and among investment classes and investment styles
Restrictions on investments
Reporting procedures, including standards for reporting: a) investment performance,
buffers and commissions charged to the plan, the participants and the plan sponsor;
c) compliance with investment guidelines, d) disclosure of actual and potential conflicts of interest.
Procedures for hiring and monitoring investment managers and other
Procedures for identifying prospective investment managers and/or
administrative service providers
The IPS is typically only provided to participants at a participant's specific request. Committee minutes are not distributed, except in the case of public sector plans that are subject to open meeting laws.
We find a lot of value from the IPS guidelines, because we
can focus our review time on only those funds that are not
meeting the IPS guidelines. This really streamlines the
committee meetings, because most of the time, most funds meet
the IPS guidelines, so we typically only have one or two
funds that need a closer review.
We have just implemented a written policy. It's full of apple pie and common sense, so it's mainly of value to bring new committee members up to speed. We would be glad to provide it to any member who's interested (but don't expect any to express interest.)