An Investment Policy Statement (IPS) is a written policy to aid Plan fiduciaries in their decisions regarding the Plan. The IPS should define the responsibilities of all fiduciaries, whatever their role within the Plan, and set the criteria for selecting, reviewing, and eliminating the investment options offered within the Plan. An IPS is not required of Plan sponsors however, should the IRS choose to audit a Plan, an IPS is likely to be one of the first documents they ask for.
An IPS can also aid in limiting fiduciary liability by outlining the necessary investment requirements and fiduciary responsibilities needed to comply with ERISA section 404(c). If a Plan meets the requirements of Section 404(c) it may eliminate or limit fiduciary liability for participant losses.
Does your Plan have a current Investment Policy Statement?