Certified Plan Sponsor Professional (CPSP) Practice Exam

Who can serve as a 3(38) Investment Manager?

1. A local bank with no written agreement.

2. An insurance company appointed by the plan sponsor with written acknowledgment of fiduciary status.

3. A mutual fund company without a fiduciary designation.

4. A financial advisor hired by plan participants.

The correct answer is: An insurance company appointed by the plan sponsor with written acknowledgment of fiduciary status.

The correct answer indicates that an insurance company can serve as a 3(38) Investment Manager when it has been appointed by the plan sponsor and has a written acknowledgment of fiduciary status. A 3(38) Investment Manager is a fiduciary under the Employee Retirement Income Security Act (ERISA) who has the authority to manage and control the investment of plan assets, which entails a significant level of responsibility and requires the manager to make investment decisions on behalf of the plan. The criteria for a 3(38) Investment Manager include having the necessary expertise and a formal fiduciary acknowledgment, ensuring that they are held to a fiduciary standard of care. This level of oversight is critical for the protection of the plan participants and beneficiaries, making it essential that the manager understands and accepts their fiduciary duties. In contrast, other choices lack either the necessary fiduciary acknowledgment, formalized agreements, or qualifications needed to serve as a 3(38) Investment Manager. For instance, a local bank without a written agreement does not meet the requirement for formal recognition of fiduciary status. Similarly, a mutual fund company that lacks a fiduciary designation cannot fulfill the fiduciary responsibilities required of a 3(38) Investment Manager. Lastly, a financial