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Fall 2003
Diane Wasser, CPA, Partner
Director, Pension Services Group
It’s said that everyone will get their 15
minutes of fame. Well Plan Sponsors,
if that’s true, your time should have
run out ages ago. Always in the
headlines ... and often not good news.
In Amper's Pension Services Group's
ongoing effort to keep our clients and friends out of the
headlines, here is some more important information on your
responsibilities as Plan Sponsors.
In accordance with fiduciary obligations, ERISA requires Plan
Sponsors of employee benefit plans to establish a "prudent
process" for selecting investment alternatives, determining that
those investment alternatives are prudent and adequately
diversified, and monitoring investment alternatives to assure
they remain appropriate over time.
In order to carry out this very important requirement, we
recommend use of a customized investment policy statement. It
is important that a Plan Sponsor have sound documentation of
the process in place that can be referred to in the event of any
questions regarding a plan's investment decision-making
process.
An investment policy statement is a written statement that:
- outlines investment objectives,
- defines the roles of those responsible for the Plan's
investments,
- describes the criteria and procedures for selecting
investment options and investment managers,
- describes the criteria and procedures for monitoring and
reporting of investments,
- describes ways to address investment options and
investment managers that fail to satisfy established
objectives, and
- addresses participant education.
The statement should be reviewed at least annually along with fund
characteristics and performance. At that time the plan's investment performance
should be compared to appropriate market indices.
This applies to both defined contribution plans and defined benefit plans. Keep
in mind that even if you sponsor a participant directed plan or have a prototype
plan, the fiduciary standards apply.
The existence of an investment policy statement provides evidence of a prudent
investment decision process. The absence of a statement renders fiduciaries
vulnerable to legal action, either from the
Department of Labor or unhappy plan
participants.
Stay out of the headlines. Incorporate an investment policy
statement into your pension planning process.
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