How To Avoid What 401(k) Plan Sponsors Fear Most About Investment Policy Statements (Forbes)

Where should plan sponsors go when crafting Investment Policy Statements? Jim Scheinberg offers his advice for his latest feature in Forbes. 

Do you own a small business? If you do, you’ll want to offer your employees an attractive retirement plan. The 401(k) plan stands as among the most widely known and used corporate retirement plans. While your employees might find them attractive, as a plan sponsor, they do pose several challenges.

While not required, it’s generally accepted that plan sponsors should adopt an Investment Policy Statement (IPS). These shouldn’t be confused with a similarly named tool used by individual investors. The components of a corporate retirement plan are quite specific to ERISA regulations, something individual investors don’t have to worry about…

Education should address two areas: the wording of the IPS and the compliance process resulting from adopting an IPS.

Fundamentally, the IPS serves as a contractual agreement. Where do you go to when you want to craft a contract?

“The IPS is a legal document,” says Jim Scheinberg, Managing Partner of North Pier Search Consulting in Los Angeles. “Clearly a strong ERISA consultant can help with crafting a draft IPS, but in the end an ERISA attorney should sign off on a final version. Under this process, not only do sponsors end up with a thorough document, but they also may potentially be able to claim an ‘under advice of counsel’ defense if ever challenged.”

Read the full article on Forbes.

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