Certified Plan Sponsor Professional (CPSP) Practice Exam

What is often the consequence of failing to meet the performance metrics set in a Service Level Agreement (SLA)?

1. Increased administrative fees

2. Negotiated fee reductions

3. More stringent regulations

4. Reassessment of service provider eligibility

The correct answer is: Negotiated fee reductions

When performance metrics established in a Service Level Agreement (SLA) are not met, a common consequence is the negotiation of fee reductions. The purpose of an SLA is to specify the expected level of service and the metrics by which that service is measured. If the service provider fails to meet these standards, it is often seen as a breach of the agreement, which can lead to discussions around adjustments to costs for the services rendered. This reduction in fees serves as a form of recourse for the client, reflecting their dissatisfaction with the level of service provided. It essentially establishes a financial consequence for underperformance, aligning the service provider's compensation with the service quality delivered. While other options might have relevance in different contexts, they do not directly reflect the typical contractual responses seen in connection with an unmet SLA. Increased administrative fees or reassessment of service provider eligibility may occur in specific situations, but negotiating fee reductions is the more frequent and straightforward outcome when performance metrics are not met. Similarly, more stringent regulations might arise from broader industry concerns rather than from a specific SLA violation.