Certified Plan Sponsor Professional (CPSP) Practice Exam

What is the primary purpose of requiring a plan to be in writing under ERISA?

1. To enhance public relations

2. To ensure compliance with tax laws

3. To protect the rights of participants and beneficiaries

4. To simplify administrative processes

The correct answer is: To protect the rights of participants and beneficiaries

The primary purpose of requiring a plan to be in writing under the Employee Retirement Income Security Act (ERISA) is to protect the rights of participants and beneficiaries. A written plan document serves as a clear and formal declaration of the plan's terms and conditions, providing transparency regarding the benefits offered, eligibility criteria, funding, and the processes for resolving disputes. By establishing these details in writing, participants and beneficiaries can have confidence in what to expect from the plan, understand their entitlements, and be informed of their rights. This level of clarity helps to avoid misunderstandings and misinterpretations that could lead to disputes. Moreover, it creates a framework for fiduciaries to follow, ensuring they meet their obligations under the law to act in the best interests of participants and beneficiaries. In contrast, while factors like enhancing public relations, ensuring compliance with tax laws, and simplifying administrative processes may have relevance within the broader context of managing a retirement plan, they are secondary to the core intent of safeguarding participant rights, which is the essential focus of ERISA’s written plan requirement.