What is the purpose of an Investment Policy Statement for a benefit plan?

• A. To describe the plan's governance structure
• B. To outline employee eligibility rules
• C. To document investment objectives, risk tolerance, permitted asset classes, and monitoring procedures
• D. To specify premium payment methods

Answer: (C)

An Investment Policy Statement for a benefit plan sets the framework for how plan assets will be invested. It officially documents the plan’s investment objectives, the level of risk the plan can tolerate, the permitted asset classes, and how investments will be monitored and reviewed over time. This combination creates a disciplined, consistent approach that aligns with participants’ interests and regulatory requirements, guiding fiduciaries in making and reviewing investment decisions. It isn’t about plan governance, participant eligibility, or funding methods, which are administrative or funding topics rather than the investment decision framework.