A few weeks back we explained how dangerous outdated language may be hiding in your 401(k) plan’s investment policy statement (IPS). Last week we outlined how a 401k plan sponsor should construct an appropriate IPS. These well-articulated and reasoned articles are just fine, but we’ve discovered humor often yields more effective results than straight logic. In that vein, we present the Top 10 reasons every 401(k) plan needs an updated investment policy statement:

#10: An IPS integrates and allows you to remain focused on your corporate Vision and Mission statements – Seriously, where else do you use these things, anyway?

#9: An IPS forces you to act with consistency regarding investment objectives – Any Joe can pick a bum investment option, but the DOL only forgives the ones who document how they picked it.

#8: An IPS defines an explicit timeline to regularly review and updated the document – What, like you don’t have better things to do?

#7: An IPS can help show you how to communicate better with your employees – Since we all know you're such an expert at that now (just ask your employees).

#6: An IPS offers a proper accounting of real risks as they pertain to the plan’s exact demographics – See above.

#5: An IPS outlines measurable procedures for trustees’ and participants’ education – See above above, and your little dog, too.

#4: An IPS provides an outline for you to follow in your periodic due diligence reports – Making it more difficult to be “sold” the next great thing by your local neighborhood non-fiduciary investment salesman.

#3: An IPS contains a well laid-out identification of the method of evaluation – Which just might scare away those aforementioned salesmen before they waste too much of your time.

#2: An IPS might just be the first piece of documentation asked for when the DOL auditors come a calling – But you knew that because your fiduciary consultant already told you.

And the #1 reason every 401(k) plan needs an updated investment policy statement (drum roll, please):

An IPS can keep you out of trouble – Unless you’re foolish enough to not follow what it says, for then you’ll be as exposed to liability as a lone zebra in the veldt during Simba’s dinner time.

OK, so I won’t make it on Letterman. Maybe you’d prefer the original articles referenced in this story’s first paragraph.

Instant Insights /

Top 10 reasons every 401(k) needs an updated investment policy statement

More From HR Executive

Related Stories

Recommended For You