Certified Plan Sponsor Professional (CPSP) Practice Exam

What is true regarding benchmarking plan investment and administration fees?

1. ERISA requires benchmarking of all fees

2. ERISA does not require benchmarking, but fees should be reasonable

3. Benchmarking must occur annually

4. All plan fees must be equal

The correct answer is: ERISA does not require benchmarking, but fees should be reasonable

The assertion that ERISA does not require benchmarking, but fees should be reasonable, reflects the principles established under the Employee Retirement Income Security Act (ERISA). While ERISA emphasizes that plan fiduciaries must ensure that fees and expenses are reasonable for the services rendered, it does not mandate that benchmarking of fees must take place. However, performing benchmarking is often considered a best practice to determine whether the fees charged are in line with the market and what is typical for similar plans. This concept is rooted in the fiduciary duty that plan sponsors have under ERISA to act prudently and in the best interests of plan participants. By ensuring fees are reasonable, fiduciaries can protect themselves from potential legal issues related to excessive fees, and benchmarking can be a valuable tool in achieving that goal. As such, while benchmarking is not a requirement, it is advisable for plan sponsors to engage in this practice to assess the appropriateness of their plan fees.