Certified Plan Sponsor Professional (CPSP) Practice Exam

True or False: A plan sponsor can eliminate its fiduciary responsibility by hiring a third-party fiduciary.

1. True

2. False

3. Only in special circumstances

4. When explicitly stated in the plan document

The correct answer is: False

A plan sponsor cannot eliminate its fiduciary responsibility simply by hiring a third-party fiduciary because ultimate responsibility for managing a retirement plan rests with the plan sponsor. While hiring a third-party fiduciary can significantly delegate the day-to-day management and certain fiduciary tasks related to the plan, the plan sponsor is still responsible for overseeing the third party and ensuring that prudent processes are in place. The plan sponsor must perform due diligence when selecting the third-party fiduciary and continuously monitor their performance. This ongoing responsibility means that the plan sponsor is still accountable for the plan's operations, compliance with ERISA (Employee Retirement Income Security Act) standards, and meeting the best interests of the plan participants. Thus, while a third-party fiduciary can assist with fiduciary duties, they do not absolve the plan sponsor from their fiduciary responsibilities.