Certified Plan Sponsor Professional (CPSP) Practice Exam

Which of the following is NOT a reason to monitor service providers?

1. To ensure compliance with their contract

2. To protect against personal liability

3. To maintain professional relationships

4. To safeguard the plan participants' interests

The correct answer is: To maintain professional relationships

Monitoring service providers is essential for various reasons that ensure the integrity and effectiveness of the services provided, as well as the protection of plan participants. The option indicating the maintenance of professional relationships, while beneficial, is not a primary reason for monitoring service providers. Ensuring compliance with contractual obligations is crucial since it ensures that the service provider is meeting their responsibilities and that the plan sponsor is fulfilling their own obligations under the contract. This compliance also mitigates risks that may stem from non-performance or underperformance by the provider. Protecting against personal liability is another significant reason for monitoring service providers. Plan sponsors can sometimes be held personally liable for the actions or omissions of service providers, and regular monitoring helps them maintain oversight and control over the services used by the plan, thereby reducing their risk. Safeguarding the interests of plan participants is a fundamental responsibility of plan sponsors. Monitoring services helps to ensure that participants receive the benefits and protections they are entitled to and that their interests are being prioritized in the management of the plan. While maintaining professional relationships can be a favorable outcome of monitoring, it does not represent a core reason for the necessity of oversight. Therefore, it stands apart from the critical functions that monitoring serves within the context of compliance, liability, and participant protection.