Certified Plan Sponsor Professional (CPSP) Practice Exam

What does the term "fiduciary responsibility" encompass for plan sponsors?

1. Complete operational control

2. Exclusive purpose of providing benefits

3. Delegation of all responsibilities

4. Financial performance guarantees

The correct answer is: Exclusive purpose of providing benefits

The term "fiduciary responsibility" for plan sponsors primarily encompasses the exclusive purpose of providing benefits to plan participants and beneficiaries. This means that plan sponsors are legally and ethically obligated to act in the best interests of the participants. This includes making decisions related to the plan's investments, administration, and overall management with the sole aim of enhancing the benefits for those covered by the plan. A fiduciary must ensure that the assets of the retirement plan are managed prudently and for the exclusive purpose of providing benefits, rather than serving the interests of the plan sponsor or other parties. This responsibility also includes understanding the various aspects of the plan, such as fees, investment choices, and participant communications, which all serve the overarching goal of delivering promised benefits effectively. In contrast, the other options do not accurately encapsulate this fiduciary obligation. Complete operational control suggests a broader authority that could extend beyond the scope of fiduciary duties. Delegation of all responsibilities indicates a relinquishment of accountability, which contradicts the essential nature of fiduciary responsibility. Financial performance guarantees imply a promise of specific investment outcomes, which fiduciaries typically do not provide, as they are expected to make prudent decisions rather than assure performance.