Certified Plan Sponsor Professional (CPSP) Practice Exam

Which of the following statements regarding the plan sponsor fiduciary duty under ERISA is correct?

1. Plan sponsors have a fiduciary duty to establish a prudent procedure for selecting, monitoring and replacing plan investment options.

2. Plan sponsors are not required to evaluate investment options regularly.

3. Plan sponsors can delegate their fiduciary duties to third-party advisors without any oversight.

4. Fiduciaries are only responsible for investment performance, not for selection processes.

The correct answer is: Plan sponsors have a fiduciary duty to establish a prudent procedure for selecting, monitoring and replacing plan investment options.

The correct assertion regarding the plan sponsor fiduciary duty under ERISA emphasizes that plan sponsors are obliged to establish a prudent procedure for selecting, monitoring, and replacing plan investment options. This fiduciary duty is crucial because it aligns with the overarching goal of ERISA to ensure that plan participants receive the benefits promised to them in a manner consistent with sound financial and ethical practices. Under ERISA, fiduciaries must act in the best interests of the plan participants and beneficiaries, which includes not only choosing investment options wisely but also maintaining ongoing oversight of those investments. This involves implementing procedures that allow for regular evaluation of investment performance and the relevance of the selected investments to participants' needs. The other statements do not reflect the responsibilities placed upon fiduciaries. For instance, the assertion that plan sponsors are not required to evaluate investment options regularly is misleading since regular evaluations are critical to fulfilling fiduciary duties. Similarly, the idea that fiduciaries can delegate their duties without oversight contradicts the fundamental principle that fiduciaries retain responsibility for their actions and cannot completely pass on that responsibility. Lastly, stating that fiduciaries are only responsible for investment performance ignores the necessity of having a prudent selection process, which is equally critical to their duties.