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It's a classic tale from Hollywood westerns. Two gunfightersstand off against each other under the heat of the high noon sun.Beads of sweat pool on their foreheads above their squinting eyes.Their rough hands dangle dangerously by their sides.

Who will win the draw?

The quick one?

Or the accurate one?

There's a lesson to learn from these tales that often see thequick dispatched by the victorious accurate. Plan sponsors shouldkeep this in mind when they consider adopting a 401(k) Investment Policy Statement (see"When Do 401k Plan Sponsors Usually Adopt anInvestment Policy Statement?" FiduciaryNews.com, February 6,2020).

Now, I'm going to say something that will rankle a fewfeathers.

I'm not sold that you need to adopt an Investment Policy Statement when the planstarts.

Don't get me wrong. If it were my 401(k) plan, I'd have noproblem with immediately adopting an IPS. I've had a hand inwriting enough of them that I'm totally comfortable going from zeroto 60 when it comes to an IPS.

Most plan sponsors, on the other hand, don't have decades ofhands-on experience with retirement plans. Asking them to adopt anIPS before the plan accepts its first contributions is like askingsomeone to jump into the deep end before taking swimminglessons.

Why not wade in? No one is keeping time on a stopwatch to seehow fast you can adopt an IPS. There simply no rush to do it.

And what's the danger of placing speed ahead of accuracy?

Investment Policy Statements can be very unforgiving. Worse,what works well for one plan sponsor might be disastrous foranother.

This is because an IPS is a legal document. It's a promise theplan sponsor makes to plan participants. And it's enforced byregulators. And a breach of that promise exposes the plan sponsorto a liability they could have easily avoided.

So, here's the deal. Rather than taking a dive into the deep endall at once, plan sponsors should dip their toes in first to get afeel for the water's temperature. Then, after a bit of time wadinginto the shallow end of 401(k) plan operations, perhaps then plansponsors might be comfortable enough to test the deep end.

This practical experience is important. It instructs plansponsors as to the limits of their capabilities. Knowing theselimits allows plan sponsors to make sure their IPS is worded in away that keeps their obligations within those natural limits.

They won't learn these limits, though, unless they test drivetheir 401(k) plan for some certain amount of time.

That's why it doesn't make sense to always adopt an IPS when theplan is new. The plan sponsor needs to settle into a groove first.Get used to all the procedures. Know what it means to make acommitment to those procedures.

Only then can plan sponsors sign the dotted line.

READ MORE:

• 401(k) plan sponsors must keep their eye on the IPSball – Carosa
• Use the investment policy statement as a plansponsor training tool – Carosa
• 401(k) investment policy statements more importantthan ever – Carosa