Certified Plan Sponsor Professional (CPSP) Practice Exam

If an employee of your recordkeeper provides investment advice to plan participants, does this create fiduciary responsibility for the plan sponsor?

1. Yes, it does

2. No, it does not

3. Only if the recordkeeper is named as a fiduciary

4. Only under certain conditions

The correct answer is: Yes, it does

When an employee of the recordkeeper provides investment advice to plan participants, it establishes a fiduciary responsibility for the plan sponsor under certain conditions. This is rooted in the concept that if the advice is given in a fiduciary capacity, particularly under regulations such as the Employee Retirement Income Security Act (ERISA), it can create a fiduciary obligation to act in the best interest of participants. In this scenario, since the recordkeeper's employee is providing investment advice, their role may involve influencing the investment decisions of plan participants. According to ERISA guidelines, a fiduciary must act prudently and solely in the interest of plan participants. If the investment advice is deemed to influence the participants’ investment choices, the responsibility extends to the plan sponsor, who must ensure that fiduciary duties are met to avoid potential liability. Understanding that investment advice inherently comes with expectations of prudence reinforces why the correct answer states that this situation does indeed create fiduciary responsibility for the plan sponsor. This emphasizes the importance of monitoring practices and ensuring that any third-party provider behaves in accordance with fiduciary standards to protect participants' best interests.