Certified Plan Sponsor Professional (CPSP) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Certified Plan Sponsor Professional Exam. Use flashcards and multiple choice questions with full explanations. Achieve exam success!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Plan sponsors may limit fiduciary responsibility for plan participant investment decisions by...

Documenting that the plan complies with 404(c) requirements to provide a broad range of investment options.
Providing unlimited access to investment advisors for each participant.
Eliminating all range of investment options from the plan.
Allowing participants to choose only between cash and bond funds.

The correct answer is: Documenting that the plan complies with 404(c) requirements to provide a broad range of investment options.

The correct response highlights the importance of compliance with Section 404(c) of the Employee Retirement Income Security Act (ERISA), which is crucial for plan sponsors. When a plan adheres to the 404(c) regulations, it provides a broad range of investment options and the necessary information for participants to make informed decisions. This compliance is significant because it helps limit the fiduciary liability of the plan sponsor regarding the investment choices made by participants. By documenting that the plan meets these requirements, the plan sponsor can demonstrate that they fulfill their duty to provide participants with a diverse selection of investment opportunities, thereby shifting some responsibility for investment performance to the individual participants. This creates an environment where participants are empowered to make their own choices, effectively limiting the fiduciary responsibility of the sponsors regarding potential losses that may result from those choices. In contrast, other options do not adequately support the limitation of fiduciary responsibility. For instance, providing unlimited access to investment advisors could enhance decision-making but does not inherently limit fiduciary liability. Eliminating all investment options or narrowing choices to only cash and bond funds do not comply with the 404(c) requirements and would not effectively limit the fiduciary responsibility of the plan sponsor.