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SageView: Why DC Plans Need an Investment Policy Statement

Since 1999, written investment policy statements have become far more common. Severe equity market downturns, along with litigation alleging that participants experienced disproportionate losses from the downturns due to imprudent investment design and fund selection, encouraged greater use of investment policy statements.

While more than 80% of DC sponsors have adopted a written IPS, including 92% of sponsors of plans covering over 5,000 participants, many sponsors — especially those with smaller plans — have yet to develop one, according to data by the Plan Sponsor Council of America. Moreover, some plans have written policies that are poorly crafted or that the sponsor is not following.

SageView Advisory Group’s recent white paper, “Investment Policy for Defined Contribution Plans,” explains why DC sponsors without an IPS, or with a poorly crafted one or with one that isn’t being followed, are “unnecessarily exposing themselves” to fiduciary liability.

Author Jon C. Chambers, QPFC, Managing Director with SageView, reviews legal requirements applicable to IPS, practical reasons for establishing and following an IPS, why it matters how it is developed and elements typically included in an IPS.

Other SageView white papers are posted here.