Certified Plan Sponsor Professional (CPSP) Practice Exam

Plan fiduciaries who breach their duties may face which of the following sanctions?

1. Only removal from position.

2. Civil and criminal penalties, along with personal liability.

3. Loss of all employee benefits.

4. Public reprimand only.

The correct answer is: Civil and criminal penalties, along with personal liability.

Plan fiduciaries who breach their duties may face civil and criminal penalties, along with personal liability. This reflects the serious nature of fiduciary responsibilities under laws such as the Employee Retirement Income Security Act (ERISA). Fiduciaries are expected to act in the best interest of the plan participants and beneficiaries, which includes making prudent decisions regarding plan assets and adhering to established policies and procedures. If a fiduciary fails to uphold these standards, they can be held liable for any losses that result from their actions or inactions. Civil penalties may include monetary damages to the plan, while criminal penalties, in severe cases, could involve imprisonment or fines for fraudulent activities. Furthermore, personal liability means that fiduciaries could be required to use their personal assets to cover losses incurred by the plan, emphasizing the significant legal and financial responsibilities they bear. The other options do not capture the full range of sanctions that fiduciaries may face. For instance, removal from position, loss of employee benefits, and public reprimand may occur depending on the situation, but these are not the primary or most severe consequences that ensue from breaching fiduciary duties. The correct and comprehensive understanding of fiduciary responsibility underscores the potential for a range of serious sanctions, reinforcing the critical nature of their role