Loading...
HomeMy WebLinkAboutHandouts_Special Meeting_Tab 02_09/01/2009®efined C®ntributi®¢~ P9an Pr®cess °fhe Written 6nvestrnent ~®@icy Statement Part L THE PLAN The ~1NSERT LEGAL COI~!IPANI' NAIi%IE~ sponsors the pINS1;RT PI:AN NANIE~ (The Plan) for the benefit of its employees. It 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. The Plan is a qualified employee benefit plan intended to comply with all applicable federal laws and regulations, including the Internal Revenue Code of 1986, as amended, and the Employee Retirement Income Security Act of 1974 (FRIBA), as amended. (lf you intend to design a plan that is 404(c} compliant and you intend to meet the requirements of ERISA Section 404(c), you will need to insert the following language: The Plan is intended to comply with ERISA Section 404(c) and the choice disclosure required by the regulations will be met.) The Plan's participants and beneficiaries are expected to have different investment objectives, time horizons, and risk tolerances. To meet these varying investment needs, participants and beneficiaries will be able to direct their account balances among a range of investment options to construct diversified portfolios that reasonably span the risk/return spectrum. ~ Participants and beneficiaries alone bear the risk of investment results from the options and asset mixes that they select. Part II. THE PURPOSE OF THE INVESTMENT POLICY STATEMENT This investment policy statement is intended to assist the Plan's fiduciaries by ensuring that they make investment-related decisions in a prudent manner. It outlines the underlying philosophies and processes for the selection, monitoring and evaluation of the investment options utilized by the Plan. Specifically, this Investment Policy Statement: • Defines the Plan's investment objectives. • Defines the roles of those responsible for the Plan's investments. • Describes the criteria and procedures for selecting investment options. • Establishes investment procedures, measurement standards and monitoring procedures. • Describes ways to address investment options that fail to satisfy established objectives. • Provides appropriate diversification within investment vehicles. Optional: Delete the bullet below if it is not applicable to your plan ~ • Describes the Plan's approach to unrestricted investment options (such as self-directed brokerage), company stock and advice. This lnvestment 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. ~ This Sample lnvestment Policy Statement is designed for an Employee-Directed plan G-~-oa ~~rxA1- - ~a-}~rnv ~a Part III. INVESTMENT 06~9ECT1!!ES The Plan's investment options will be selected to: o Maximize return 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 in various asset classes. Control administrative and management costs. Part IV. ROLES AND RESPONSIBILITIES (INSERT' COMPANY NAMis~ is responsible for the roles and responsibilities outlined below, or it can appoint an Investment Committee, in which case, the Investment Committee will perform the roles and responsibilities outlined below. Those responsible for the management and administration of the Plan's investments include, but are not limited to: The INSERT COMPANY NAMED, is responsible for selecting the trustee(s); hiring.the record keeper and/or investment advisory consultants; and appointing the members of the investment committee, if applicable. • Establishing and maintaining the Investment Policy Statement. • Selecting investment options. • Periodically evaluating the investment performance of investment options offered under the plan and recommending investment option changes. ® Providing Plan participant investment education and communication. The Plan's trustee(s) is/are responsible for reporting investment results on a regular basis as determined by the Plan fiduciaries. The record keeper is responsible for maintaining and updating individual account balances as well as information regarding plan contributions, withdrawals and distributions. Pao V. ~E~ECTO®N ®F If~~E~T~ENTS The selection of investment options offered under the Plan is among the ]INSERT €'O;~'fI~AN~' NAME ~ or its Investment Committee most important responsibilities. Set forth below are the considerations and guidelines that should be employed in fulfilling this fiduciary responsibility. Investment Selection The Plan intends to provide an appropriate range of investment options that will span the risk/return spectrum. Further, the Plan investment options will allow plan participants to construct portfolios consistent with their unique individual circumstances, goals, time horizons and tolerance for risk. Major asset classes to be offered will include: .]LIST THF., CLASSF...S OF BNVESTMFNTS TO BE, INC'LU!)E[) IN THF., PLAN -You can utilizE the sample Investment Selection MatriA we've prepared for you as a reference.] After determining the asset classes to be used, ]INyER!' C.a=)MPANY NAME] or its Investment Committee must choose the specific investment options to be offered under the Plan. Each investment manager must meet certain minimum criteria: 1. It should be a bank, insurance company, or investment management company or an investment adviser under the Registered Investment Advisers Act of 1940. 2. It should be operating in good standing with regulators and clients, with no material pending or concluded legal actions. 3. It should provide detailed additional information on the history of the firm, fee schedules and other relevant information. Assuming the minimum criteria are met, the particular investment under consideration should meet the following standards for selection: ]Plan Sponsors may consider tinalizing the 5 items below with the help of their Legal counsel and/or investment advisor.] 1. Performance should be equal to or greater than the median return for an appropriate style- specific benchmark and peer group over a specified time period. ]Commonly used. performance measures are the 3- and _5- year investment returns.] 2. Specific risk and risk-adjusted return measures should be established and agreed to by ]INSERT COMPANY NAME) and be within a reasonable range relative to an appropriate, style-specific benchmark and peer group. ]Examples of risk measures that may be used include an investment option's standard deviation and beta, and an investment option's Sharpe ratio.] 3. It should demonstrate adherence to the stated investment objective. 4. Fees should be competitive compared to similar investments. 5. The investment provider should be able to provide all performance, major holdings (i.e. top ten holdings), and other relevant information in a timely fashion, with specified frequency. VI. INVESTMENT MONITORING AN® 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 option provider immediately to INSERT COMPANY NAME(or its investment committee. Examples of such events include portfolio manager or team departure, violation of investment guidelines, material 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 provider and I INSERT C::OMPANY NAMF_,{ or its investment committee, must take steps to remedy the deficiency. If over a reasonable period the provider is unable to resolve the issue, termination may result. VII. INVESTMENT OPTION TERMINATION An investment option should be terminated when ~INSEIZT COMPANY NAMES or its investment committee has lost confidence in the investment option's potential to: • Achieve performance and risk objectives, • Achieve risk objectives, • Maintain a stable investment style There are no hard and fast rules for investment option termination. However, if the investment 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, within a reasonable time, shall be grounds for termination. Any recommendation to terminate an investment option 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 investment option manager turnover, or material change to investment processes. Considerable judgment must be exercised in the termination decision process. An investment option to be terminated shall be removed using one of the following approaches: Remove and replace (map assets) to an alternative investment option. © Continue the investment option, but add a competing investment option. o Remove the investment option and do not provide a replacement investment option. Replacement of a terminated option would follow the criteria outlined in Part V, Selection of Investments. Part VIIB. PARTICIPANT EDUCATION AND COMMUNICATION The Plan will communicate to employees that they control their own investments; permit investment changes at least quarterly; and, provide effective educational materials allowing i decisions. )N WITH THE PLAN DOCUMENT ing, if any term or condition of this investment policy conflicts with Plan, the terms and conditions of the Plan shall control. [The inforn~atio~~ contai~~ed in Part X below sl~e~uld only be included in th€s IPS if these features a~.e included in yo~~r Plan. 10-elc~te the iufot-ntatior~ that is not applicable to your Plxn.( Part Xo FURTHER GUIDELINES Self-Directed Brokerage In an effort to provide total investment flexibility, aself-directed brokerage option is offered in the Plan. The Plan's self-directed brokerage option allows participants to invest in publicly- traded security, including stocks, bonds and mutual funds, with the following exceptions: short sales, options, futures, limited partnerships, currency trading and trading on margin. In developing and maintaining the Plan's self-directed brokerage option, [INSERT COMPANY NAME(or its investment committee will evaluate the self-directed option provider for reasonable cost, competitive service capability and participant satisfaction. Company Stock (INSERT COMPANY NAME( stock is offered as an investment option pursuant to the terms of the Plan. Plan fiduciaries will be responsible for managing the investment of plan assets in company stock according to the Plan document. (INSE[2T C:C)MPANY NAME( or its investment committee will monitor the performance of (INSERT COMPANI~' NAME (stock but not for the purpose of recommending levels of company stock investment in the Plan or the elimination of company stock as a plan investment as they may have access to inside information. Advice As with any designation of a service provider to-the Plan, the designation of a company or individual to provide investment advice to plan participants and beneficiaries is an exercise of discretionary authority and control with respect to management of the Plan. Therefore, (INSERT COMPANY NAME) or its investment committee will act prudently and solely in the interest of the plan participants and beneficiaries both in making such designation(s) and in continuing such designations(s). At a minimum, the investment advice by the selected provider should be unbiased and be based on sound asset allocation theory and in-depth fund analysis. It should also be tailored to each participant's circumstances. Monitoring will occur on an annual basis and utilize the same criteria that were the basis of the investment advisor selection decision. The sample Investment Policy Statement (IPS) is based on the model IPS provided by The Profit Sharing/40I (k) Council of America (PSCA), with minor modifications and notations to provide additional instructions and clarification to plan sponsors . PSCA is a nonprofit association advocating increased retirement security through profit sharing, 401 (k) and related defined contribution programs. The Sample Investment Policy Statement is being provided for plan sponsor's convenience.