Certified Plan Sponsor Professional (CPSP) Practice Exam

Service level agreements with plan vendors assist plan fiduciaries in meeting which obligation?

1. Investment selection processes

2. Fiduciary duties to monitor service providers

3. Legal compliance and audits

4. Employee education and engagement

The correct answer is: Fiduciary duties to monitor service providers

Service level agreements (SLAs) with plan vendors are critical tools that help plan fiduciaries fulfill their obligation to monitor service providers effectively. By establishing clear expectations regarding the level of service that vendors must provide, SLAs offer a framework for assessing performance and ensuring compliance with those expectations. This monitoring is a key aspect of fiduciary duties under the Employee Retirement Income Security Act (ERISA), which mandates that fiduciaries act prudently and solely in the interest of plan participants. Through the SLA, fiduciaries can outline specific performance metrics and service standards, allowing them to regularly evaluate whether a vendor is meeting their contractual obligations. This proactive approach ensures that fiduciaries are not only aware of the services being provided but also have a structured means to hold vendors accountable, thereby safeguarding the interests of plan participants and beneficiaries. In contrast, while SLAs may provide some context relevant to investment selection, legal compliance, or employee education, their primary function in the context of plan fiduciaries centers around the ongoing monitoring and performance evaluation of service providers. This ensures that the plan's operations are effective and compliant, ultimately supporting the fiduciary’s responsibility to act in the best interests of participants.