It was only recently that we first heard of an education policy statement. But it is something we are increasingly being asked about by our members.
The only documents we specifically recommend as part of the "fiduciary file" are applicable trust documents, custodial/brokerage statements, investment performance reports, service agreements with investment management vendors, the investment policy statement, investment committee minutes, asset allocation/asset liability studies, due diligence fields on funds/money managers and monitoring procedures for funds and/or money managers.
Although we do not see an education policy statement as an integral part of the fiduciary process, the best reasons for instituting one are for the value it can provide to you in clarifying the goals and strategy in your participant education activities or for marketing purposes, if it is something you are encountering as a demand of the market.
During our training programs, we do discuss participant education as part of 404(c) safe harbor compliance. Part of 404(c) requirements is to ensure participants receive sufficient education on the available investment options to make an informed investment decision. In that regard, we do recommend that a good education program should include providing each participant with:
- each investment option’s most recent prospectus or similar document
- a general description of the investment objectives and risk/return characteristics of each investment option
- information on the fees and expenses associated with each investment option
- a listing of the securities held by each option
-
the performance of each investment option
-
to be safe, MPT stats, such as the Alpha, Sharpe ratio, and standard deviation of each investment option
For more information on education policy statements and participant education, in general, check out some of the following resources:
- An article in Employee Benefit News on how to reinvigorate 401(k) plans, including a source from Transamerica who recommends an EPS: http://ebn.benefitnews.com/news/out-of-hibernation-2710045-1.html
- A look at what Fred Reish has written on a given subject is usually helpful. Here is the results page for a search on “participant education”: http://www.drinkerbiddle.com/publications/list.aspx?KeywordPhrase=participant%20education
- An article on how to develop an education policy and strategy, including a recommendation to formalize it with an EPS: http://www.shrm.org/hrdisciplines/benefits/Articles/Pages/401kEducation.aspx
- A blog post we did a while back on participant education: http://blog.fi360.com/fi360_blog/2008/12/a-question-on-p.html
- DOL guidance on participant investment education: http://www.dol.gov/ebsa/regs/fedreg/final/96_14093.htm
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