A:

The reason why ERISA qualified plans should have an investment policy statement is to:

a. list guidelines for choosing an investment advisor for the plan.
b. list guidelines on how plan investments should be chosen.
c. list guidelines for vesting and eligibility requirements.
d. protect plan participants from investment losses.


The correct answer is "b": the investment policy statement should outline the investment objectives, preferred investment types, expected returns, risk tolerance, etc.

RELATED FAQS
  1. Is a Simplified Employee Pension (SEP) part of the Employee Retirement Income Security ...

    Understand when a SEP plan falls under ERISA, how this act protects individual retirement savings and why the SEP is a popular ... Read Answer >>
  2. Are Simple IRA plans subject to ERISA?

    Learn how the Employee Retirement Investment Security Act, or ERISA, guides the administration of Savings Incentive Match ... Read Answer >>
Related Articles
  1. Financial Advisor

    Are You ERISA Compliant? Follow This Checklist

    Following a checklist can make achieving compliance with Employee Retirement Income Security Act of 1974 (ERISA) requirements much less burdensome.
  2. Retirement

    401(k) Investment Policy Statement: An Example

    Here's what a 401(k) investment policy statement should look like.
  3. Retirement

    403(b)s Among Plans Not Covered by New Fiduciary Rule

    Some retirement plans, including 403(b)s, are not covered by the DOL's new fiduciary rule. Here's what it means.
  4. Retirement

    Why Retirement Plan Sponsors Could Face Litigation

    A Supreme Court decision makes it easier for retirement plan participants to sue their employers. Apathy is not a strategy for plan sponsors.
  5. Financial Advisor

    Creating an Investment Policy Statement for a 401(k)

    The purpose of an investment policy statement (IPS) for 401(k) plan sponsors and eight key components that go into creating one.
  6. Investing

    Investment Policy Pitfalls

    An investment policy statement can be a powerful tool - as long as you avoid these common mistakes.
  7. Retirement

    Pension Vesting: Everything You Need to Know

    Understanding pension vesting is tricky, but it’s crucial to making wise decisions about changing jobs and collecting the most pension benefits you can.
  8. Financial Advisor

    Investment Committees: Duties and Responsibilities

    An investment committee can help plan sponsors avoid fiduciary liabilities. Included is information regarding the duties and responsibilities of investment committee members.
  9. Retirement

    New Rule Opens Door for State-Run Retirement Savings Plans

    The Department of Labor is enticing state governments to set up state-run retirement plans for private-sector workers, but some aren't happy with how.
RELATED TERMS
  1. Determination Letter

    A formal document issued by the IRS that decrees whether or not ...
  2. Employee Retirement Income Security Act - ERISA

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
  3. Nondiscrimination Rule

    A clause found in qualified retirement plans stating that all ...
  4. ISO 9000

    A series of international guidelines for quality control. ISO ...
  5. Summary Plan Description

    The summary plan description is a document that employers are ...
  6. Cliff Vesting

    The process by which employees earn the right to receive full ...
Hot Definitions
  1. Restricted Stock Unit

    Compensation offered by an employer to an employee in the form of company stock. The employee does not receive the stock ...
  2. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  3. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  4. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  5. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center