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Consider Yourself Accountable

The financial crisis made participants apprehensive about looking at their statements.  However, with a wave of retiring baby boomers around the corner, you need documents to prove that you managed plan investments prudently.  You definitely do not want retirees to try to hold you personally responsible for their retirement fund.

Surprisingly, up to half of employee benefit plans do not have a formal investment policy.  Do you have one?  An Investment Policy Statement is a document generally between an investor and the assisting investment manager, recording the agreements the two parties come to with regards to issues relating to how the investor’s money is to be managed

The statements can be tailored in numerous ways; however, the investment policy statement should be written and reviewed by a competent ERISA attorney.  The investment policy is an appropriate place to list the criteria for selecting and terminating plan investments and managers.  It can also directly address the sponsor’s fiduciary duties by specifying how frequently and which governing bodies monitor investment and manager performance.  These measures require little effort and save big headaches later if you are charged with mishandling plan assets.  In short, you don’t want to explain to a plaintiff’s attorney that you did a good job, but you just didn’t document it well. Lack of documentation is suspicious when the plaintiffs complain that available investment choices were determined solely by you and now they have losses.  An Investment Policy Statement documents the employee’s agreement to money management and thus shares the responsibility for fluctuations in returns

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