Sample Investment Policy Statement

Transcription

1 Sample Investment Policy Statement Part I. THE PLAN The <<Company Name>> sponsors <<Plan Name>> (The Plan) for the benefit of its employees. The Plan is intended to provide eligible employees with the long-term accumulation of retirement savings through a combination of employee and employer contributions to individual participant accounts and the earnings thereon. Part II. THE PURPOSE OF THE INVESTMENT POLICY STATEMENT The purpose of the Investment Policy Statement for <<company name>>, is to provide the structure for a disciplined, objective and consistent approach to the investment fund selection process. Written guidelines are designed to identify the underlying philosophies and process for the selection, monitoring and evaluation of the investment options and investment managers utilized by the Plan. Specifically, this Investment Policy Statement: Defines IRS ERISA Code adherences. Identifies the Plan s Investment Objective. Defines the roles and responsibilities of Plan fiduciaries. Describes the criteria and procedure for the selection of investment managers and fund options. Establishes fund monitoring procedures and benchmark determination. Provides education and communication guidelines. This Investment Policy Statement will be reviewed at least annually, and, if appropriate, can be amended to reflect changes in the capital markets, plan participant objectives, or other factors relevant to the Plan. Part III. IRS ERISA CODE ADHERENCES The Plan is a qualified employee benefit plan intended to comply with all applicable federal laws and regulations, including Section 401(a) of the Internal Revenue Code of 1986 (the Code), as amended, and is intended to be exempt from tax under Section 501(a) of the Code. The Plan is also in compliance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended. The Plan s fiduciaries will comply with the general principles of Section 402(b)(1) of ERISA, to provide the Plan s participants and beneficiaries with the opportunity to exercise control over the assets in their respective individual accounts. The Plan s fiduciaries expect by enabling a participant or beneficiary to exercise control over the assets in his or her account, they will not be liable for any loss, which results from such exercise of control. The Prudent Investor Rule will guide the Plan s fiduciary decision-making process. The prudent investor rule means the Plan s fiduciaries will evaluate and monitor the selected funds as they would manage their own affairs. Notably, the rule is based on the composition of the entire portfolio (Plan), not each individual fund in the Plan.

2 Part IV. ROLES AND RESPONSIBILITIES Plan Fiduciaries are those responsible for the management and administration of the Plan s investments. The <<company name>> Named Fiduciaries include but are not limited to:, President, Chief Financial Officer, Director Human Resources The Named Fiduciary is responsible for selecting the trustee(s); hiring the recordkeeper and/or investment advisory consultants. The Named Fiduciary is responsible for: Establishing and maintaining the Investment Policy Statement. Selecting investment managers and fund options. Periodically evaluating fund managers and fund performance. Recommending additions or replacement fund options. Providing Plan Participants with Investment education and communication. Reviewing that overall Plan expenses are reasonable. Documenting and retaining a written record of the decisions made and the steps taken during the selection and review process. The Plan s trustee(s), Investment Manager and Recordkeeper is responsible for: Holding and investing plan assets in accordance with the terms of the Trust Agreement. Making reasonable investment recommendations consistent with the stated objectives of the Plan and reporting investment results on a regular basis as determined by the Named Fiduciary. Maintaining and updating individual account balances as well as information regarding plan contributions, withdrawals and distributions. Part V. INVESTMENT OBJECTIVES The Plan s Investment options will be selected to provide the following benefits: Maximize returns within reasonable and prudent levels of risk. Provide returns comparable to returns for similar investment options. Provide exposure to a wide range of investment opportunities as described below. Control administrative and management costs. It is the intent of the Plan to offer a broad range of investment choices for a wide spectrum of investors whose objectives are typically classified as conservative, moderate and aggressive. Options will offer materially different investment characteristics (e.g. risk, return, market segment, asset class) to help provide Plan participants with the opportunity to better attain their goals while considering their own time horizon, risk tolerance, return expectations, asset allocation and diversification needs. The investment funds will have fund objectives of growth, value, income or asset preservation. Preservation of capital, aversion to unnecessary risk and achievement of investment returns equal to or greater than specified benchmarks describe the overall, guiding philosophy of the Plan.

3 Part VI. SELECTION OF INVESTMENTS AND MANAGERS The following criteria are meant to be used collectively as a basis for selecting the specific investment funds within the Plan. While one parameter may hold more importance over another, it is not the intent to have an individual criteria act as the sole basis of the selection decision. The Named Fiduciary recognizes that prevailing market conditions may cause slight variations in the prioritization and weighting characteristics. Within a specific asset class the parameters will be compared to peers and appropriate benchmarks where applicable. When choosing the individual investment funds available under the Plan, each option should be evaluated for the following parameters: Positive Alpha versus Peer Group - The alpha coefficient is a measure of risk-adjusted return. It measures the difference between the fund s actual performance and the performance anticipated in light of the fund s risk and the market s behavior. A positive alpha indicates that the portfolio manager has been successful at security selection and /or market timing and has produced a rate of return, which is more than commensurate with the fund s risk posture. Fund Manager Tenure - The current Fund Manager must have at least (3, 5 or 10) years managing the fund Investment Performance - The fund must have at least (1, 3, 5, 7 or 10) years of investment performance Operating Expenses - Funds expenses are compared against their Peer Group. The total fund operation expenses must be equal to or below Median in Category. Historical Performance - The fund s actual return compared to its appropriate Peer Group. The fund s performance must equal or exceed that of its Peer Group median for 4 out of 5 annual periods. Trailing Portfolio Returns - Funds are ranked against their Peer Group. Ranking is 1 100, 1 being best. The investment must be in the top ( 25%, 33% or 50%) in its Peer Group rank for the last one, three, five, and ten-year period. Positive Returns - Reported actual positive annual returns in 4 of the last 5 calendar years. (This is where the classes of investments to be included in the Plan are to be listed. The appropriate benchmark and peer group for each investment will be noted.) After determining the asset classes to be used, <<company name>>/investment committee must evaluate investment managers and choose managers to manage the specific investment options. Each investment manager must meet certain minimum criteria: Qualify as an investment advisor, investment company, bank or insurance company under the Registered Investment Advisor Act of Be operating in good standing with regulators and have no material legal actions pending. Provide the history of the firm, its investment philosophy and approach, its principals, clients, locations, fees and other relevant information. Demonstrate adherence to the state fund investment objective. Provide all performance, holdings, and other detailed information on an accurate and timely basis.

4 Part VII. INVESTMENT MONITORING AND REPORTING The on-going monitoring of investments must be a regular and disciplined process. It is the mechanism for revisiting the investment option selection process and confirming that the criteria originally satisfied remain so and that an investment option continues to be a valid offering. While frequent change is neither expected nor desirable, the process of monitoring investment performance relative to specified guidelines is an on-going process. Monitoring should occur on a regular basis (e.g., quarterly) and utilize the same criteria that were the basis of the investment selection decision. It will include a formal review annually. Further, unusual, notable or extraordinary events should be communicated by the investment manager immediately to <<company name>>/the investment committee. Examples of such events include portfolio litigation against the firm, or material changes in firm ownership structure, or announcements thereof. If overall satisfaction with the investment option is acceptable, no further action is required. If areas of dissatisfaction exist, the investment manager and <<company name>>/the investment committee must take steps to remedy the deficiency. In over a reasonable period the manager is unable to resolve the issue, termination may result. Part VIII. MANAGER TERMINATION An investment manager should be terminated when <<company name>>/the investment committee has lost confidence in the manager s ability to: Achieve performance and risk objectives Comply with investment guidelines Comply with reporting requirements, or Maintain a stable organization and retain key relevant investment professionals. There are no hard and fast rules for manager termination. However, if the investment manager has consistently failed to adhere to one or more of the above conditions, it is reasonable to presume a lack of adherence going forward. Failure to remedy the circumstances of unsatisfactory performance by the investment manager, within a reasonable time, shall be grounds for termination. Any recommendation to terminate an investment manager will be treated on an individual basis, and will not be made solely based on quantitative data. In addition to those above, other factors may include professional or client turnover, or material change to investment processes. Considerable judgment must be exercised in the termination decision process. A manager to be terminated shall be removed using one of the following approaches: Remove and replace (map assets) with an alternative manager Freeze the assets managed by the terminated manager and direct new assets to a replacement manager Phase out the manager over a specific time period Continue the manager but add a competing manager Remove the manager and do not provide a replacement manager Navigate the manager to a brokerage window (if available)

5 Replacement of a terminated manager would follow the criteria outlined in Part V, Selection of Investments and Managers. Part IX. PARTICIPANT EDUCATION AND COMMUNICATION It is the intent of the Plan s Named Fiduciary to provide participant communication and education on a continual basis. To accomplish this, Participants will receive and have access to the following: Quarterly statements, financial newsletters and fund fact sheets. Asset Allocation models and questionnaire. Client Services Center, VRU and Internet with daily ability to transfer funds, check balances, change deferral amounts and elections. Enrollment meetings and general group meetings that explain the Plan and its benefits. Retirement Seminars. Part X. COORDINATION WITH PLAN DOCUMENT Not withstanding the foregoing, if any term or condition of this investment policy conflicts with any term or condition in the Plan, the terms and conditions of the Plan shall control. Adopted by ABC, Inc. Named Fiduciaries on Named Fiduciary Signature President Chief Financial Officer Director-Human Resources