Certified Plan Sponsor Professional (CPSP) Practice Exam

Who qualifies as a functional fiduciary in a retirement plan context?

1. Any person with investment management experience.

2. Only third-party investment advisors.

3. Any person with discretionary authority over plan management.

4. Individuals who only provide administrative support.

The correct answer is: Any person with discretionary authority over plan management.

In the context of retirement plans, a functional fiduciary is defined by the authority and responsibilities they hold concerning plan management. A person qualifies as a functional fiduciary if they have discretionary authority over the management of the plan or its assets. This means they are responsible for making decisions that can impact the plan's operations and participants’ benefits, including investment decisions and overall plan governance. The term “discretionary authority” implies that the individual has the power to make choices or take actions regarding the plan without needing prior approval from someone else. This level of responsibility demands a significant understanding of the plan’s objectives, the legal framework governing retirement plans, and the implications of those decisions on participants and beneficiaries. This designation of fiduciary duty underscores the importance of accountability in managing the assets and operations of retirement plans, adhering to the prudent person standard as outlined by ERISA (the Employee Retirement Income Security Act). Anyone who fits the criteria of exercising discretionary authority automatically assumes fiduciary responsibilities and must act in the best interest of the participants and beneficiaries. In contrast, individuals who only provide administrative support typically do not have decision-making power regarding plan management or asset allocation, and those with only investment management experience would not automatically be considered fiduciaries unless they also have the requisite discretionary