Certified Plan Sponsor Professional (CPSP) Practice Exam

What sanctions may be imposed on plan fiduciaries who breach their duties?

1. Only fines from the Department of Labor.

2. Personal liability for losses and removal from their position.

3. Exemption from future fiduciary duties.

4. Preventing litigation against their actions.

The correct answer is: Personal liability for losses and removal from their position.

Fiduciaries have a legal and ethical obligation to act in the best interests of the plan participants and beneficiaries. When they breach these duties, significant consequences can follow. One of the primary sanctions imposed on fiduciaries is personal liability for any losses that result from their actions. This means that they can be held accountable for the financial harm caused to the plan. Additionally, breaching fiduciary duties may lead to removal from their positions, which can undermine the trust and accountability expected in their role. The imposition of personal liability serves as a deterrent against negligence or misconduct, reinforcing the importance of adhering to fiduciary responsibilities. In contrast, other options suggest either insufficient repercussions or ways that attempts to avoid accountability, which do not align with the fiduciary standards mandated under regulations such as the Employee Retirement Income Security Act (ERISA). This regulatory framework is designed to protect plan participants and beneficiaries from fiduciary mismanagement, ensuring that those who fail to uphold their duties face appropriate sanctions.