Certified Plan Sponsor Professional (CPSP) Practice Exam

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A written investment policy statement (IPS)...

Must be followed by the plan investment committee or plan investment manager.
Is optional but recommended for all investment plans.
Can be modified at any time without board approval.
Is only required for plans with more than 100 participants.

The correct answer is: Must be followed by the plan investment committee or plan investment manager.

A written investment policy statement (IPS) is fundamental in guiding the investment decisions and strategies of an organization’s retirement plan. This document establishes a framework for consistent decision-making and ensures that all investments align with the predetermined objectives, risk tolerance, and guidelines defined by the plan investment committee or investment manager. By mandating adherence to the IPS, the plan investment committee is held accountable to the pre-established principles and constraints, promoting fiduciary responsibility and prudent investment management. This can help protect against arbitrary or emotionally driven investment decisions and ensure that the investment strategy remains aligned with the long-term goals of the plan and its participants. While other options address aspects of the IPS, they do not encapsulate its critical role in directing and regulating investment practices within the plan, thereby affirming the necessity of compliance by the responsible parties.