Investment policy statement (IPS)

What an investment policy statement is

A typical IPS names who is responsible for investment decisions, such as a committee, a 3(21) adviser or a 3(38) investment manager. It lists the asset classes the plan will offer, the criteria for choosing funds, the benchmarks and review schedule for monitoring them, the plan’s default investment, and how often fees are reviewed.

Why it matters to employers

ERISA judges fiduciaries by their process, not by results. A written policy and minutes showing that you followed it are strong evidence of that process. The reverse is also true: a policy with rigid triggers that nobody follows can be used against you. ERISA section 404(a)(1)(D) requires fiduciaries to follow the plan’s governing documents as long as they are consistent with ERISA, and current DOL regulations treat following an investment policy statement as part of that duty (29 CFR 2550.404a-1(d)(4)(ii)). The older DOL bulletin on investment policy statements, 29 CFR 2509.2016-01, was withdrawn in 2020. When a 3(38) investment manager is hired, the manager often maintains the IPS.

Example

An IPS says a fund that trails its benchmark for three years in a row goes on a watch list. Committee minutes show a fund was flagged in 2025, reviewed each quarter and replaced in 2026.

Common mistakes

• Adopting a template with numeric triggers the committee does not follow.

• Not updating the IPS when the plan adds a new kind of investment, such as a brokerage window.

• Keeping no minutes of investment reviews.