I have always thought that it would be a great idea if someone could keep track of practitioners’ “war stories” about DOL and IRS audit activity in order to keep plan sponsors apprised of developments. Ilene Ferenczy has provided some great information about DOL audit activity going on in the Atlanta region in this email update entitled “DOL Working Hard in the Atlanta Area to Ferret out Fiduciary Breaches.” She notes in her article that the DOL examinations she has been involved with recently happen to be targeting small employers (3 – 5 employees) rather than large employers. In one case where the owner of the company was the trustee, she discusses how the DOL had taken issue with the fact that there were no investment policies and procedures in place.
Where can you learn more about the ERISA requirements for investment policy statements? Actually, there is no specific ERISA provision that mandates that a plan have an investment policy statement. However, the DOL has said the following in Interpretative Bulletin 94-2:
The maintenance by an employee benefit plan of a statement of investment policy designed to further the purposes of the plan and its funding policy is consistent with the fiduciary obligations set forth in ERISA section 404(a)(1)(A) and (B).
Also, at least one federal district court has gone farther than that and held that a failure to have an investment policy statement under the facts of the case before the court constituted a breach of fiduciary duty. Liss v. Smith, 991 F.Supp. 278 (S.D.N.Y. 1998). (Sorry, no link to the case that I can find.)
(By the way, Ilene is well-known in the benefits world for her treatise: “Employee Benefits in Merger and Acquisitions.”)