Certified Plan Sponsor Professional (CPSP) Practice Exam

Why is timely contribution to the plan trust important for a fiduciary?

1. It prevents legal repercussions only.

2. It ensures participants receive benefits as expected.

3. It maintains optimal cash flow for the employer.

4. It allows for easier plan management.

The correct answer is: It ensures participants receive benefits as expected.

Timely contribution to the plan trust is crucial for a fiduciary primarily because it ensures that participants receive their benefits as expected. This responsibility underscores the fiduciary duty to act in the best interests of plan participants and beneficiaries. When contributions are made on time, the plan can effectively manage investments, accumulate interest, and provide the promised benefits without delays. This reliability in benefit distribution is vital for maintaining participant trust and ensuring that they can plan their financial futures based on the expected benefits from the plan. While maintaining optimal cash flow for the employer, avoiding legal repercussions, and facilitating easier plan management are also significant factors to consider, the primary concern should be the immediate impact on the participants’ benefits. By fulfilling the obligation to make timely contributions, fiduciaries uphold their commitment to safeguarding the financial well-being of the plan participants, which is the foremost goal of their responsibilities.