Retirement Tools

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Retirement Tools Issues, Ideas and Insights from Janus Retirement Strategy Group

The IPS provides the following benefits to plan sponsors: ¾¾Documents procedures of the decision-making process to potentially prevent breaches of fiduciary responsibility ¾¾Defines how the plan will satisfy ERISA’s diversification requirements ¾¾Potentially improves the long-term viability of the plan as a valuable employee benefit by ensuring that investment decisions are made from a long-term strategic perspective ¾¾Streamlines both the investment selection and the ongoing investment monitoring processes ¾¾Reassures plan participants that their investment contributions are invested in a prudently constructed retirement plan that is continually being overseen in their best interests

Investment Policy Statement An Overview for Plan Sponsors OVERVIEW The primary purpose of an investment policy statement (IPS) is to outline the process that a plan’s sponsor intends to use in selecting and monitoring investments within the company’s retirement plan. With persistent volatility in capital markets and increased government scrutiny of defined contribution plans, it is becoming more important for plan sponsors and their fiduciaries to have a written procedure for carrying out plan policies in a manner consistent with known objectives. The IPS, if properly designed, can show that the plan has in place a strategy for selecting, monitoring, and when necessary, altering plan investments or investment options. If the investment policy is reasonable, and if the policy is followed, the plan fiduciary will likely have complied with ERISA’s fiduciary guidelines, thus helping the plan fiduciary avoid breach of fiduciary responsibility. To assist plan sponsors with the creation or maintenance of an IPS, this document intends to cover the essential information required in a well-crafted policy, why it can be helpful to plan sponsors in managing the plan and what key components are included in a typical policy.

WHAT SHOULD AN IPS ADDRESS? Though the Employee Retirement Income and Security Act (ERISA) does not require a plan sponsor to adopt an IPS, if one is adopted, it will best serve the plan fiduciary if it’s completed in such a manner that provides a clear road map for the plan fiduciary. Specifically, the policy should: 1. Provide direction and procedural guidelines that will allow for the selection and ongoing monitoring of investment options and service providers; 2. Comply with the fiduciary responsibility standard imposed by ERISA; and 3. Meet the plan’s overall objectives.

INSTITUTIONAL INVESTOR USE ONLY/NOT FOR PUBLIC VIEWING OR DISTRIBUTION

How to Create or Evaluate an IPS The following checklist can help capture critical information plan sponsors need to both establish and monitor their IPS. AN INVESTMENT POLICY STATEMENT SHOULD INCLUDE:

££ The underlying purpose of the plan and the general plan investment policy

ADDITIONAL DISCUSSION TOPICS WHEN EVALUATING INVESTMENT POLICY STATEMENTS:

££ Assess the needs of the plan participants

££ Description of factors a plan will take into account

in selecting investments, including risk /return characteristics, guidelines for asset classes and plan diversification

-- Understand investment time horizon, risk tolerance and investment education of plan participants

££ Selecting asset categories in the plan -- Understanding ERISA Section 404(c) which mandates the inclusion of at least three different types of investment options with different risk/ return characteristics

££ Description of how the plan will select service providers, including money managers

££ Criteria for evaluating investment performance ££ Description of the methodology the plan will use to monitor service providers

££ Does the IPS discuss Qualified Default Investment Alternatives (QDIA)?

££ Identification of the various parties involved in the process of selecting, managing and monitoring investments, and their particular responsibilities

££ Description of how the plan will rebalance its

-- An IPS should have a provision regarding the selection and monitoring of QDIA

££ Does the IPS include detailed language about Target

investment portfolio

££ E xplanation of procedures for controlling and accounting for investment-related expenses

Date Funds?

-- What are the guidelines for reaching decisions and is the target date fund “to retirement” or “through retirement”?

££ The plan’s intent to operate in compliance with

Department of Labor regulations issued pursuant to ERISA Section 404(c)

Get the information you need from the Janus Retirement Strategy Group Look to Janus for information on how changes in retirement plan regulation might affect you and the clients you serve.

To learn more, please call 877.33JANUS (52687).

The tax information contained herein is provided for informational purposes only and should not be construed as legal or tax advice. Your clients’ circumstances may change over time so it may be appropriate for you and your client to evaluate tax strategy with the assistance of a professional tax advisor. Federal and state tax laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information contained in this document. Janus does not have information related to and does not review or verify your clients’ financial or tax situation. Janus is not liable for your use of, or any tax position taken in reliance on, such information. This document is not intended to be legal or fiduciary advice or a full representation of all responsibilities of plan sponsors and advisors.

INSTITUTIONAL INVESTOR USE ONLY/NOT FOR PUBLIC VIEWING OR DISTRIBUTION C-0913-45420 9-30-15

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