Certified Plan Sponsor Professional (CPSP) Practice Exam

What role do service level agreements play in plan management?

1. They increase the number of available service providers

2. They define expectations and performance metrics for vendors

3. They eliminate the need for due diligence

4. They are optional and not needed

The correct answer is: They define expectations and performance metrics for vendors

Service level agreements (SLAs) are critical components in plan management as they establish clear expectations and performance metrics for vendors. By defining specific benchmarks for service delivery, SLAs help ensure that vendors provide a consistent level of service in accordance with the requirements of the plan sponsor. This may include metrics related to response times, quality of service, reporting obligations, and compliance with regulations. The establishment of these parameters not only facilitates accountability but also aids in the evaluation and monitoring of vendor performance. Should a vendor fail to meet the outlined standards, the plan sponsor can address this non-compliance through the agreement, thereby safeguarding the interests of the plan and its participants. By clearly articulating expectations and how performance will be measured, SLAs contribute to effective and efficient plan management, fostering a mutually beneficial relationship between the plan sponsor and the service provider.