What Policies Does Our Plan Need?

“We sponsor an ERISA 403(b) plan. Are we required to have any policies in addition to our plan document? It appears that many of our peers have a loan policy and an investment policy, but we do not.”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

No, there is nothing in the Internal Revenue Code or the Employee Retirement Income Security Act that requires a plan sponsor to adopt or maintain policy statements—whether a loan policy, investment policy or any other policy. Nevertheless, should you choose to offer loans under your plan, please be aware that the terms and conditions of such loans should be specified, whether in the plan document or summary plan description or in a separate loan policy. In addition, the IRC and regulations restrict the scope of investment options that a 403(b) plan can offer, and any policy statement must be consistent with such rules. As such, while policy statements are not required, they are useful supplemental roadmaps to assist with plan administration and regulatory compliance. The most popular policies appear to be investment and loan policies, though the Experts have come across other policy types as well, such as fee policies, education policies and cybersecurity policies.

Of course, before you develop any policies, you should consult with ERISA counsel and whomever wrote your plan document (if not ERISA counsel) for possible coordination of policy language with plan document language, as many plan documents incorporate policies by reference.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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