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You don't have to have an Investment Policy Statement for your401(k) plan. It's a blade that can cut both ways. Writtenwell, an IPS offers a template to easily protect both theplan sponsor and the plan participant. Written poorly, it exposesthe plan sponsor to unnecessary liabilities.

Whether the IPS is crafted well or poorly will depend on who'sdoing the crafting – and who's not, (see "Who Is Generally Responsible For Designing,Detailing, And Approving The 401k IPS?" FiduciaryNews.com,January 30, 2020).

Let's focus on trying to avoid those unnecessary liabilities.This is perhaps the greatest unforced error when it comes to a401(k) IPS. It's too easy to treat the exercise of creating an IPSas a statement of elegance, not pragmatism. This is how plansponsors expose themselves.

OK, to make sure this doesn't happen, you need a lot of experts.This is one case where too many chefs won't spoil the pot. Who arethese chefs and what should you expect from them?

Most will immediately cite the investment adviser as the headchef. The problem arises when this provider acts as the onlychef.

Since the investment adviser will be placed in the position tocontinually monitor and assess plan investment options, the IPSusually defines a due diligence process familiar to the adviser.But it's the plan sponsor who's often left holding the bag if theadviser cuts a corner (or, worse, drops the ball) at any point inthis process.

This means that the process defined in the IPS must be one whichthe plan sponsor can easily oversee. To insure this, the plansponsor needs to put on a chef's hat when it comes to what the IPSsays. If the investment reporting jargon leaves the plan sponsortoo dependent on the adviser's expertise in translating it, thatjargon probably should be removed or amended.

The IPS must be written in the language of the plan sponsor, notthe service provider.

If you're paying attention, you can guess how this concept mightbe extrapolated. This extrapolation gives you an idea of who elsemight be involved in the IPS review process.

Remember, when it comes down to it, the IPS is nothing more thana set of procedures. The plan sponsor, either directly orindirectly through third parties, makes a promise that theseprocedures will be followed.

To the extent these procedures involve third parties, they willneed to agree to them. If you want these service providers toagree, you'll need them at the table when the IPS is beingdrafted.

This would therefore necessitate the recordkeeper (and possiblythe payroll processing agent) being involved because the IPSdescribes the flow of participant funds into and out ofinvestments. In addition, the IPS may also describe how thoseinvestments are regularly monitored, and that should be reflectedin how that same information is supplied to the participant.

The recordkeeper will usually provide employees the gateway toaccess their 401(k) account. This gateway should be consistent withwhat the IPS promises. If the recordkeeper is not part of the IPScreation process, the risk is it may not be. The plan sponsor,however, is likely to be held accountable for this.

Which leaves us with one last chef – the plan's ERISA attorney.Now, I'm not an attorney, so I can't tell you the legalramifications of the language used in the IPS. The ERISA attorneycan.

And you should heed that advice.