Lesson

The Investment Policy Statement (IPS), in the context of the Employee Retirement Income Security Act (ERISA), is a document that outlines the investment objectives, risk tolerance, and investment strategies for a retirement plan. It guides plan fiduciaries and investment managers in making investment decisions and monitoring the plan's performance.

Practice Question #1

Which of the following is NOT a component of an investment policy statement (IPS)?

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Terms

Investment Policy Statement (IPS):
A document that outlines the investment objectives, risk tolerance, and investment strategies for a retirement plan.
Fiduciary:
A person or entity responsible for managing a retirement plan's assets on behalf of plan participants and beneficiaries.
Investment Guidelines:
Specific rules and restrictions governing managing a retirement plan's assets.

Practice Question #2

What is the primary purpose of an investment policy statement (IPS) in the context of ERISA?

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Historical Example

In the 1970s, a series of high-profile pension plan failures led to the creation of ERISA. The law was designed to protect the retirement assets of millions of Americans by establishing strict standards for plan fiduciaries and requiring the creation of an IPS to guide investment decisions.

Practice Question #3

Which federal law requires the creation of an investment policy statement (IPS) for retirement plans in private industry?

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Real-World Example

A small business owner establishes a 401(k) plan for her employees. She hires an investment manager to oversee the plan's assets and creates an IPS that outlines the plan's investment objectives, risk tolerance, and asset allocation strategy. The IPS serves as a roadmap for the investment manager, helping to ensure that the plan's assets are managed in the employees' best interests.

Practice Question #4

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Rhyme

An IPS for ERISA, a guide that won't dismiss ya, For fiduciaries and managers, a roadmap to assist ya, With objectives, risk, and strategies, a plan that won't resist ya, Protecting retirement assets, a document to persist ya.

Practice Question #5

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