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6 Cards in this Set

  • Front
  • Back
Funding Policy
A policy that addresses the level and timing of contributions necessary to fund benefit obligations throughout the life of a retirement plan.
Investment Policy
Applies specifically to the governance of plan assets.
ERISA requirements for investment policy statements
ERISA does not explicitly require a pension plan sponsor to draft an investment plicy statement (IPS).
Importance of written investment policy
●Monitoring investments and documentation of that monitoring is important to fulfill a plan sponsor's fiduciary responsibility.
●The IPS helps in the selection of investment managers.
●Written policies help to evaluate and monitor future investment performance.
Components of an investment policy statement
1. Asset allocation target
2. Policies for rebalancing the portfolio
3. Policies for revewing investment objectives and liability assumptions
4. Benchmarks and/or performance expectations for each managed portfolio
5. Benchmarks and/or perfomance expectations for the overall portfolio
6. Proxy voting policies
7. Policies stating what percentage of manager trading will be directed by the plan sponsor
8. Diversification, liquidity, and quality requirements as well as restrictions
9. Statement of investment objectives
10. Projected cash flows
Two major issues addressed in the Investment Policy Statement (IPS)
1. Establishing guidelines and restrictions for each asset class and for the portfolios withing each class
2. Specifying performance goals.