How to Write an Investment Policy Statement, 2nd Edition

CHAPTER 9

SAMPLE IPS TEMPLATE #1

For a Participant-Directed 401(k) That Intends to Comply with ERISA Section 404(c)

STEP 1. Executive Summary and Background

(INSTRUCTIONS/EXPLANATIONS) Begin by writing an overview and background of the plan. The overall objective is to have the IPS provide sufficient detail so that a third party will be able to implement the investment strategy. The IPS should be flexible enough that it can be implemented in a complex and dynamic financial environment, and yet not so detailed it requires constant revisions and updates.

Executive Summary

Date:

Type of Plan: Defined-Contribution Plan—401(k)

Plan Sponsor: MY CLIENT COMPANY

Plan IRS Tax Identification: 56-111111

Current Assets: $20,000,000

Participant-Directed Investment Options: Yes, 404(c) adopted

Frequency to Change Investment Options: Daily

The XYZ Company Employee Retirement Plan is a defined-contribution plan started in 1985 and is one of two qualified employee retirement plans sponsored by XYZ Company. The purpose of the XYZ Company Employee Retirement Plan is to encourage employees to build long-term careers with XYZ Company by providing eligible employees with a convenient way to save on a regular and long-term basis for retirement.

XYZ Company Employee Retirement Plan currently covers 2,500 employees. The number of employees is anticipated to increase at the rate of 5 percent per year for the next five years. Plan size is currently $20,000,000 and annual contributions should total $2,500,000-$3,000,000. ...