Certified Plan Sponsor Professional (CPSP) Practice Exam

What must be included in the annual report to participants regarding fees and expenses?

1. Only administrative fees

2. Voluntary contributions

3. Investment returns and administration fees

4. Market comparison analysis

The correct answer is: Investment returns and administration fees

The requirement to include investment returns and administration fees in the annual report to participants is essential for transparency and informed decision-making. This report serves to enhance participants' understanding of the costs associated with their retirement plans and the performance of their investments. Investment returns give participants insight into how their contributions have been growing or declining over time, thereby allowing them to assess the effectiveness of their investment choices. Providing information on administration fees is crucial because these fees can significantly impact the overall returns on their investments. Fees can vary widely depending on the type of plan and the services provided, so disclosing these allows participants to understand the costs they are incurring. Participants’ awareness of these aspects is vital for them to make informed decisions regarding their investments in the plan. This includes evaluating whether the returns justify the fees or if adjustments are necessary to optimize their retirement savings strategy. In contrast, focusing solely on administrative fees or voluntary contributions does not provide a complete picture of the financial implications of the plan. Including a market comparison analysis, while valuable, is not a required component of the annual report for participants. The primary focus should be on providing clear, concise information regarding fees and performance to empower participants in their retirement planning.