What is an investment policy statement (IPS) and is one required?
Last updated October 2, 2026
An IPS is the written roadmap for selecting, monitoring, and replacing plan investments — criteria, benchmarks, and review procedures. ERISA doesn't literally require one, but it's the standard evidence of a prudent investment process, and courts and the DOL expect to see it followed.
The IPS turns "prudent investment oversight" from a concept into a procedure. A solid one defines:
- The plan's investment objectives and menu structure (asset classes, number of options, default)
- Selection criteria for funds — performance, risk, fees, manager tenure
- Monitoring benchmarks and the watch-list process for underperformers
- Criteria and procedures for replacing or removing options
No statute mandates an IPS — but its absence reads as the absence of a process, and its presence creates an obligation: follow it. An IPS the committee ignores is plaintiff's Exhibit A. Review it periodically, apply it at each investment review, and record that application in minutes.
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