Recording Investment Changes

Regular review of the plan investment menu is part of a prudent fiduciary process—which can also include the drafting of an investment policy statement (IPS) and formation of an investment committee—although neither is required.

We analyzed sponsor data from the 2017 Defined Contribution (DC) Survey, looking at plans of various sizes, both with and without an IPS, to see whether having one translates to better documentation of investment changes.

According to the data, plan size has no impact on, for example, sponsor confidence when it comes to documenting investment decisions. The data by size simply show some gaps—i.e., in the large and mega markets between those with and without an IPS—but no consistent trends. Overall, however, plan sponsors of all sizes that have an IPS are more likely (by 38%) to think they document changes appropriately.

Further, there is a substantial correlation between committee confidence and the presence of an IPS. Eighty-nine percent of plans with an investment committee also have an IPS. The greatest confidence is found among plans with both (55%); the least confidence is found among plans with neither (37%).

Having an IPS and an investment committee appears to increase confidence for plan administrators and create a better-protected plan.