Certified Plan Sponsor Professional (CPSP) Practice Exam

What is the role of a discretionary trustee in a plan?

1. To oversee administrative tasks

2. To invest plan assets with fiduciary responsibility

3. To ensure compliance with regulations

4. To act as a spokesperson for the beneficiaries

The correct answer is: To invest plan assets with fiduciary responsibility

The role of a discretionary trustee in a plan primarily involves investing plan assets with fiduciary responsibility. This trustee has the authority to make investment decisions without needing explicit consent from the beneficiaries. This discretionary power allows the trustee to adapt investment strategies based on market conditions and the need to meet the objectives of the plan and the best interests of the participants. By exercising discretion, the trustee must act prudently and in accordance with the fiduciary duties imposed by law, ensuring that the investments align with the plan's goals. This responsibility includes selecting suitable investments and monitoring their performance over time to ensure they continue to meet the needs of the plan. Other roles such as overseeing administrative tasks, ensuring compliance with regulations, and acting as a spokesperson for the beneficiaries are important but fall under different responsibilities. An administrative fiduciary may focus on the operational side of the plan, while compliance roles ensure that the plan meets the legal requirements. A spokesperson role is typically more about communication than the financial stewardship required of a discretionary trustee.