Certified Plan Sponsor Professional (CPSP) Practice Exam

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Prepare for the Certified Plan Sponsor Professional Exam. Use flashcards and multiple choice questions with full explanations. Achieve exam success!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Why is it crucial for plan sponsor professionals to identify all functional fiduciaries?

To ensure compliance with the IRS regulations.
Because the plan sponsor is responsible for the actions of all fiduciaries.
To limit personal liability for plan sponsors.
To facilitate better communication among plan fiduciaries.

The correct answer is: Because the plan sponsor is responsible for the actions of all fiduciaries.

Identifying all functional fiduciaries is essential because the plan sponsor has a legal responsibility for the actions of all fiduciaries associated with the retirement plan. This means that any decisions made, or failures to act by these fiduciaries, can directly impact the plan sponsor. Understanding who the fiduciaries are allows the plan sponsor to manage risk effectively and fulfill their duty of care and loyalty required under the Employee Retirement Income Security Act (ERISA). This requirement underscores the need for comprehensive oversight over those involved in decision-making processes, ensuring that fiduciaries act in the best interests of plan participants and beneficiaries. By knowing all functional fiduciaries, the plan sponsor can monitor their activities and ensure compliance with legal standards and fiduciary duties, ultimately protecting both the participants' interests and the sponsor's own liability.