Certified Plan Sponsor Professional (CPSP) Practice Exam

Which option correctly describes the fiduciary duties Debbie has as a fiduciary for the company's 401(k) plan?

1. To focus only on investment performance

2. To hire the cheapest service providers

3. To ensure benefits for participants and reasonable expenses

4. To avoid any conflicts of interest

The correct answer is: To ensure benefits for participants and reasonable expenses

Debbie's role as a fiduciary for the company's 401(k) plan entails a duty to act in the best interests of the plan participants. This responsibility includes ensuring that the benefits provided to participants are protected and that the plan incurs reasonable expenses. Fiduciaries are required to prioritize the interests of plan participants over their own or those of the company, making it essential to develop a prudent process for evaluating services and investments. By focusing on both benefits for participants and maintaining reasonable expenses, Debbie upholds her obligation to provide a retirement plan that effectively supports its users while managing costs effectively. This dual emphasis ensures that participants receive adequate retirement security without excessive fees that could erode their savings over time. In contrast, merely concentrating on investment performance would ignore other critical aspects of fiduciary duty, such as ensuring that fees are equitable. Hiring the cheapest service providers may overlook the quality of services needed to effectively manage the plan, while avoiding any conflicts of interest is important but does not encompass the full scope of fiduciary duties, which also includes the financial health and management of the plan.