What does an Investment Policy Statement (IPS) for a defined contribution plan show?

An Investment Policy Statement (IPS) for a defined contribution plan serves as a guiding document that outlines how the plan will operate in terms of investment selection and evaluation. It lays out the criteria for choosing the investment options available to participants, ensuring those selections align with the overall objectives and constraints of the plan. The IPS typically includes metrics and methods for evaluating investment performance, but its primary focus is on the processes for selection and ongoing evaluation of those options.

While performance expectations and objectives are certainly important components of an IPS, they are part of a broader framework that includes how investments will be managed and assessed. The IPS does not typically serve to showcase a fund manager's track record, as that is more of a historical measure rather than a component of the guiding principles for the plan. Thus, the main purpose of an IPS aligns most closely with how to select and evaluate investment options, making this choice the most fitting.