ASPPA Certified Pension Consultant (CPC) Examination — Questions and Answers

Question 1: A plan sponsor wants to reduce equity volatility while maintaining upside participation. Which overlay strategy is MOST appropriate?

Buying put options on a broad equity index (Correct answer)
Selling equity futures short
Purchasing Treasury STRIPS
Writing covered calls on the equity portfolio

Correct answer: Buying put options on a broad equity index

Buying put options provides downside protection (a floor) while preserving all upside beyond the option premium cost.

Question 2: After a standard defined benefit plan termination, within how many days of completing distributions must the plan administrator file the post-distribution certification with the PBGC?

60 days (Correct answer)
90 days
180 days
30 days

Correct answer: 60 days

The plan administrator must file PBGC Form 501 (Post-Distribution Certification) within 30 days after the last distribution date of the standard termination.

Question 3: A CPC transitions a client to another pension consultant. What ethical obligation exists regarding client files and records?

The CPC must destroy confidential files within 30 days to protect client privacy
The CPC must obtain IRS approval before transferring plan records
The CPC must cooperate in the orderly transition of files and records to protect the client's interests (Correct answer)
The CPC may retain all files as business records and is not required to share them

Correct answer: The CPC must cooperate in the orderly transition of files and records to protect the client's interests

Professional standards require cooperation in client transitions, including providing files and records needed to ensure continuity of service for the client's benefit.

Question 4: A defined benefit plan's funded status deteriorates because liability growth outpaces asset returns. Which strategy BEST addresses this asset-liability mismatch?

Shift to an all-equity portfolio for higher returns
Implement a liability-driven investment (LDI) strategy using long-duration bonds (Correct answer)
Increase employer contributions only
Freeze plan benefits immediately

Correct answer: Implement a liability-driven investment (LDI) strategy using long-duration bonds

LDI aligns asset duration with pension liability duration, reducing funded-status volatility when interest rates change.

Question 5: A pension consultant receives a referral fee from an investment firm for recommending the firm's collective investment trusts. Under DOL guidance, what must the consultant do?

Return the fee within 30 days
File Form 5500 Schedule C disclosing the fee
Disclose the fee arrangement to plan fiduciaries and ensure the arrangement is reasonable (Correct answer)
Keep the fee confidential to avoid conflicts of interest

Correct answer: Disclose the fee arrangement to plan fiduciaries and ensure the arrangement is reasonable

ERISA Section 408(b)(2) requires that service providers receiving indirect compensation disclose such arrangements to plan fiduciaries to allow informed decision-making.

Question 6: What is the significance of ERISA Section 3(21) in defining who is a plan fiduciary with ethical obligations?

It identifies as fiduciaries anyone who exercises discretionary authority over plan management, assets, or administration, or who provides investment advice for a fee (Correct answer)
It defines the actuarial standards for plan valuations
It defines the coverage and nondiscrimination testing rules
It establishes the minimum vesting schedules for qualified plans

Correct answer: It identifies as fiduciaries anyone who exercises discretionary authority over plan management, assets, or administration, or who provides investment advice for a fee

ERISA Section 3(21) defines a plan fiduciary as any person who exercises discretionary authority or control over plan management or assets, or who renders investment advice for a fee.

Question 7: For the 2024 plan year, an employee is classified as a highly compensated employee (HCE) based on compensation from the employer that exceeded what threshold in the prior year?

$150,000 (Correct answer)
$175,000
$160,000
$130,000

Correct answer: $150,000

For 2024, an employee is an HCE if their 2023 compensation exceeded $150,000, or if they were a 5% owner at any time during the current or prior plan year.

Question 8: Under the 'rule of parity,' an employer may disregard an employee's pre-break years of service if the consecutive one-year breaks in service equal or exceed which threshold?

The greater of 3 years or pre-break years of service
The greater of 5 years or pre-break years of service (Correct answer)
5 consecutive years regardless of prior service length
The total years of service accumulated before the break

Correct answer: The greater of 5 years or pre-break years of service

The rule of parity permits disregarding pre-break service if the number of consecutive one-year breaks equals or exceeds the greater of 5 years or the employee's years of pre-break service.

Question 9: What is the 'target normal cost' used in minimum funding calculations under IRC Section 430?

The plan's normal cost increased by the shortfall amortization charge
The sum of all participant account balances
The normal cost under the plan's actuarial cost method minus the expected plan expenses for the year (Correct answer)
The present value of all vested benefits

Correct answer: The normal cost under the plan's actuarial cost method minus the expected plan expenses for the year

Target normal cost equals the plan's actuarial normal cost plus expected plan expenses, minus expected employee contributions for the plan year.

Question 10: Which ERISA section governs the fiduciary duty of prudence for plan administrators?

ERISA Section 502(a)
ERISA Section 404(a)(1)(B) (Correct answer)
ERISA Section 401(a)
ERISA Section 408(b)(2)

Correct answer: ERISA Section 404(a)(1)(B)

ERISA Section 404(a)(1)(B) establishes the prudent man standard, requiring fiduciaries to act with the care, skill, prudence, and diligence of a prudent expert.

Question 11: Which law requires parity between mental health and physical health benefits?

MHPAEA (Correct answer)
FLSA
ACA
HIPAA

Correct answer: MHPAEA

The Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008 requires group health plans and health insurance issuers to ensure that financial requirements and treatment limitations for mental health or substance use disorder benefits are no more restrictive than those for medical/surgical benefits. This ensures equal access to care for mental and physical health conditions, preventing discrimination in coverage.

Question 12: A CPC is advising a client on selecting between a defined benefit plan and a cash balance plan. Which factor most strongly favors a cash balance plan for a small professional services firm?

The ability to use the cross-tested allocation formula
Simpler administration and portability of benefits for younger, mobile employees (Correct answer)
Avoidance of PBGC premiums
The need for the highest possible contribution limits for older, higher-earning owners

Correct answer: Simpler administration and portability of benefits for younger, mobile employees

Cash balance plans combine DB-level tax advantages with DC-style account-based portability, making them attractive when the workforce values lump-sum flexibility over annuity payments.

Question 13: Which safe harbor 401(k) non-elective contribution design eliminates the need for annual ADP and ACP nondiscrimination testing?

A 3% non-elective contribution to all eligible non-highly compensated employees (Correct answer)
A 2% non-elective contribution to all plan participants
A 5% profit-sharing contribution allocated only to officers
A 50% matching contribution on employee deferrals up to 6% of compensation

Correct answer: A 3% non-elective contribution to all eligible non-highly compensated employees

A safe harbor 401(k) plan that provides a non-elective contribution of at least 3% of compensation to all eligible NHCEs satisfies the ADP and ACP safe harbor requirements.

Question 14: When a CPC relies on work product provided by another professional (e.g., a valuation from an appraiser), what is the CPC's responsibility?

The CPC must independently verify all aspects of the relied-upon work
The CPC must assess whether reliance is reasonable and disclose the reliance in their own work product (Correct answer)
The CPC must obtain the other professional's written certification before using their work
None—the other professional bears sole responsibility for their work

Correct answer: The CPC must assess whether reliance is reasonable and disclose the reliance in their own work product

Professional standards allow reliance on other experts when the reliance is reasonable and disclosed; the CPC need not independently replicate the work but must use professional judgment about its reasonableness.

Question 15: An enrolled actuary signs a Schedule SB for a plan with a known material actuarial error. What is the correct professional response?

Refuse to sign and advise the plan administrator of the error (Correct answer)
Sign the form because the plan administrator is ultimately responsible
Correct the error and file an amended return without notifying the IRS
Sign the form and disclose the error in a footnote

Correct answer: Refuse to sign and advise the plan administrator of the error

Enrolled actuaries have a professional duty not to certify a return containing a known material error; they must refuse to sign and advise the client to correct the filing.

Question 16: A plan sponsor wants to add a cash balance formula alongside an existing final average pay formula in the same plan. What is this arrangement called?

Hybrid plan (Correct answer)
Floor-offset plan
Pension equity plan
Tiered benefit plan

Correct answer: Hybrid plan

A plan combining a traditional defined benefit formula with a cash balance formula is a hybrid plan design.

Question 17: What is a fiduciary's primary duty?

Act in the participants' best interest (Correct answer)
Maximize company profits
Follow investment trends
Favor highly compensated employees

Correct answer: Act in the participants' best interest

A fiduciary's primary duty in managing a retirement plan is to act solely in the best interest of the plan participants and beneficiaries. This 'duty of loyalty' requires fiduciaries to make decisions that prioritize the financial well-being and retirement security of those covered by the plan. They must put participants' interests above all other considerations, including their own or the employer's.

Question 18: What is the tax treatment of an excess deferral (amount deferred above the IRC Section 402(g) limit) if not corrected by April 15 of the following year?

It is forfeited to the plan
It is treated as a Roth contribution automatically
It is subject only to the 10% early withdrawal penalty
It is taxed in the year of deferral AND again when distributed, resulting in double taxation (Correct answer)

Correct answer: It is taxed in the year of deferral AND again when distributed, resulting in double taxation

Excess deferrals not returned by April 15 are included in income in the year of the excess deferral and again upon distribution, creating double taxation.

Question 19: Which exception allows a plan to distribute a benefit without participant consent when the present value is below a specified threshold?

$7,000 de minimis rule
$10,000 small-benefit rule
$1,000 involuntary cash-out limit triggering mandatory IRA rollover
$5,000 involuntary cash-out with mandatory IRA rollover for amounts over $1,000 (Correct answer)

Correct answer: $5,000 involuntary cash-out with mandatory IRA rollover for amounts over $1,000

Plans may cash out vested benefits of $5,000 or less without consent; amounts above $1,000 but at or below $5,000 must be rolled to an IRA if the participant doesn't elect otherwise.

Question 20: Which law governs private pension plans in the U.S.?

COBRA
ADA
ERISA (Correct answer)
HIPAA

Correct answer: ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) is the comprehensive federal law that governs most private sector employee benefit plans, including pension and retirement plans, in the U.S. ERISA sets minimum standards for these plans, protecting participants and beneficiaries by establishing fiduciary responsibilities, reporting requirements, and disclosure rules to ensure proper plan administration and financial integrity.

Question 21: Under ERISA's break-in-service restoration rules, if a previously vested employee terminates, receives a distribution, and later returns to service, when must the employer restore previously forfeited employer contributions?

Only if the employee repays the distribution with interest
If the break in service is less than 3 consecutive years
If the break in service is less than 5 consecutive years (Correct answer)
Only if the employee returns before reaching the plan's normal retirement age

Correct answer: If the break in service is less than 5 consecutive years

Under the five-year break rule, a returning employee's forfeited amounts must be restored if they had fewer than 5 consecutive one-year breaks in service.

Question 22: What does COBRA provide to employees?

Immediate pension benefits
Continuation of health insurance (Correct answer)
Retirement contributions
Higher salaries

Correct answer: Continuation of health insurance

The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods. This continuation coverage is available under specific circumstances, such as job loss, reduction in hours, or other qualifying events, ensuring a temporary bridge for health coverage.

Question 23: Under the Unit Credit actuarial cost method, how is the normal cost determined?

As a level percentage of projected pay
As a flat percentage of plan assets
As a level dollar amount over the participant's career
As the present value of the benefit earned during the current year (Correct answer)

Correct answer: As the present value of the benefit earned during the current year

The Unit Credit method defines the normal cost as the present value of the benefit unit earned by each participant during the current plan year.

Question 24: Under the Mental Health Parity and Addiction Equity Act (MHPAEA), group health plans may not impose financial requirements on mental health benefits that are more restrictive than the predominant requirements applied to what?

All plan benefits in aggregate
Medical/surgical benefits in the same classification (Correct answer)
Out-of-network benefits
Prescription drug benefits only

Correct answer: Medical/surgical benefits in the same classification

MHPAEA requires that financial requirements (copays, deductibles) and treatment limitations for mental health/substance use disorder benefits be no more restrictive than those applied to substantially all medical/surgical benefits in the same classification.

Question 25: Under ERISA Section 3(38), an 'investment manager' must be all of the following EXCEPT:

Acknowledged in writing to be a plan fiduciary
A licensed broker-dealer registered with FINRA (Correct answer)
A registered investment adviser under the Investment Advisers Act
A bank or insurance company

Correct answer: A licensed broker-dealer registered with FINRA

ERISA Section 3(38) defines an investment manager as an RIA, bank, or insurance company that acknowledges fiduciary status in writing; broker-dealer registration alone does not qualify.

Question 26: Which segment rate is used to discount liabilities for benefit payments expected more than 20 years from the valuation date?

First segment rate
Second segment rate
Blended average of all three segment rates
Third segment rate (Correct answer)

Correct answer: Third segment rate

The third segment rate, reflecting longer-maturity corporate bond yields, applies to benefit payments due more than 20 years after the valuation date.

Question 27: The General Rule for taxation of annuity payments applies when?

The annuity is provided through an IRA
All annuity payments began before 1987
The participant made no after-tax contributions to the plan
The participant's after-tax investment in the contract cannot be recovered using the Simplified Method (Correct answer)

Correct answer: The participant's after-tax investment in the contract cannot be recovered using the Simplified Method

The General Rule applies to annuity payees who cannot use the Simplified Method, typically because their annuity starting date predates 1987 or the pension is from a non-qualified plan.

Question 28: What is the tax treatment of a qualified distribution from a Roth 401(k) account?

Subject to 10% penalty but not income tax
Partially taxable based on the pro-rata rule
Fully taxable as ordinary income
Completely tax-free if made after age 59½ and the 5-year holding period is met (Correct answer)

Correct answer: Completely tax-free if made after age 59½ and the 5-year holding period is met

A qualified Roth 401(k) distribution—made after age 59½ and after a 5-year participation period—is entirely excluded from gross income.

Question 29: A plan sponsor with 400 participants asks a CPC to benchmark their 401(k) plan fees. What should the CPC recommend as the basis for the fee evaluation?

Evaluate all fees (investment, recordkeeping, advisory) relative to services received and comparable market alternatives for similar-sized plans (Correct answer)
Focus only on investment management expense ratios
Accept the bundled fee quoted by the plan's current provider without comparison
Compare total fees to the plan's 5-year investment returns only

Correct answer: Evaluate all fees (investment, recordkeeping, advisory) relative to services received and comparable market alternatives for similar-sized plans

Fee benchmarking requires evaluating the reasonableness of all plan costs relative to the services provided and market rates for comparable plans, consistent with the fiduciary duty to pay only reasonable plan expenses.

Question 30: Which of the following employees may generally be excluded from coverage testing under IRC Section 410(b)?

Employees covered by a collective bargaining agreement where retirement benefits were subject to good-faith bargaining (Correct answer)
All employees with less than 2 years of service regardless of hours worked
Part-time employees completing more than 500 hours of service
Employees who are age 18 but have not yet reached age 21

Correct answer: Employees covered by a collective bargaining agreement where retirement benefits were subject to good-faith bargaining

IRC 410(b)(3)(A) permits plans to exclude employees covered by a collective bargaining agreement where retirement benefits were a subject of good-faith bargaining.

Question 31: In a glide path design for a target-date fund, equity allocation typically:

Increases as the target date approaches
Mirrors the plan's asset allocation at all times
Decreases as the target date approaches (Correct answer)
Remains constant regardless of participant age

Correct answer: Decreases as the target date approaches

Glide paths reduce equity exposure over time as participants near retirement to decrease the impact of sequence-of-returns risk.

Question 32: Under the permissive aggregation rules for IRC Section 410(b), when may an employer combine two separate qualified plans for coverage testing purposes?

Only when each plan individually passes the ratio percentage test
When both plans have identical allocation or benefit formulas
Only when both plans are defined contribution plans covering the same employees
When the aggregated plan would satisfy the applicable coverage tests as if it were a single plan (Correct answer)

Correct answer: When the aggregated plan would satisfy the applicable coverage tests as if it were a single plan

Permissive aggregation allows an employer to treat two plans as one for coverage testing, provided the combined plan would independently satisfy the applicable coverage requirements.

Question 33: Which professional organization publishes the Code of Professional Conduct that governs enrolled actuaries working on pension plans?

The Society of Actuaries (SOA)
The American Academy of Actuaries (AAA) (Correct answer)
The Joint Board for the Enrollment of Actuaries (JBEA)
The American Society of Pension Professionals & Actuaries (ASPPA)

Correct answer: The American Academy of Actuaries (AAA)

The American Academy of Actuaries publishes the Code of Professional Conduct, which applies to all actuaries including enrolled actuaries advising on pension plans.

Question 34: A participant receives a plan loan that fails to meet IRC Section 72(p) requirements. What is the tax consequence?

The loan is reclassified as an employer contribution
The loan is forgiven without tax consequence
The loan amount is treated as a taxable deemed distribution (Correct answer)
Interest payments become deductible as investment interest

Correct answer: The loan amount is treated as a taxable deemed distribution

A loan that violates Section 72(p) requirements (amount, term, or repayment schedule) is treated as a deemed distribution, making the loan balance immediately taxable to the participant.

Question 35: What is the 'prudent expert' standard under ERISA that governs fiduciary conduct?

Fiduciaries must act with the care, skill, prudence, and diligence of a knowledgeable expert familiar with relevant matters (Correct answer)
Fiduciaries must achieve above-market investment returns to satisfy their duty
Fiduciaries must hire an independent actuary to approve all plan decisions
Fiduciaries must act as carefully as the average layperson would in managing personal finances

Correct answer: Fiduciaries must act with the care, skill, prudence, and diligence of a knowledgeable expert familiar with relevant matters

ERISA's prudent expert standard requires fiduciaries to act with the care, skill, prudence, and diligence that a knowledgeable and prudent person familiar with such matters would use under similar circumstances.

Question 36: Which Form must a plan administrator file with the IRS and PBGC to report a reportable event such as a funding waiver or a significant decrease in active participants?

PBGC Form 10 (Correct answer)
Form 5310
Form 5500
IRS Form 8955-SSA

Correct answer: PBGC Form 10

PBGC Form 10 is used to report reportable events under ERISA Section 4043, such as active participant reductions of 20% or more, missed contributions, or plan amendments that significantly reduce benefits.

Question 37: A pension consultant who is a plan fiduciary recommends that the plan invest in a fund managed by the consultant's own firm. This is best described as:

Permissible if the fund's returns are above average
Required if the fund is a lower-cost option than alternatives
Acceptable if disclosed to the plan sponsor only
A potential prohibited transaction requiring a prohibited transaction exemption (PTE) (Correct answer)

Correct answer: A potential prohibited transaction requiring a prohibited transaction exemption (PTE)

Self-dealing by a fiduciary—using plan assets to benefit the fiduciary's own financial interests—is a prohibited transaction under ERISA Section 406(b) and requires an exemption.

Question 38: A plan sponsor amends the plan to reduce future benefit accruals. Under ERISA's anti-cutback rule (Section 411(d)(6)), the plan sponsor:

Must provide 90 days' advance notice to all affected participants
Must increase employer contributions to compensate for reduced accruals
Must obtain DOL approval before the amendment takes effect
Cannot reduce benefits already accrued as of the amendment's effective date (Correct answer)

Correct answer: Cannot reduce benefits already accrued as of the amendment's effective date

ERISA Section 411(d)(6) prohibits plan amendments that reduce or eliminate benefits already accrued—future accruals can be reduced, but past accruals are protected.

Question 39: A 401(k) plan fails the ADP test for the current plan year. Which of the following is a permissible corrective action the employer may take to cure the failure?

Permanently reduce the HCE contribution limit to 3% of compensation
Transfer excess HCE balances into a non-qualified deferred compensation plan
Automatically convert all HCE deferrals to after-tax Roth contributions
Make qualified non-elective contributions (QNECs) to NHCEs sufficient to bring the plan into compliance (Correct answer)

Correct answer: Make qualified non-elective contributions (QNECs) to NHCEs sufficient to bring the plan into compliance

Making QNECs to eligible NHCEs raises the NHCE ADP and can bring the plan into ADP test compliance without penalizing HCEs or requiring distributions.

Question 40: Which vesting schedule is the FASTEST allowable for employer matching contributions under ERISA?

3-year cliff
2-year cliff (Correct answer)
Immediate 100%
6-year graded

Correct answer: 2-year cliff

Matching contributions must vest on at least a 2-year cliff or 6-year graded schedule, making 2-year cliff the fastest permissible schedule for matching.

Question 41: Under the ratio percentage test for IRC Section 410(b) coverage, the percentage of NHCEs benefiting must be at least what fraction of the percentage of HCEs benefiting?

70% (Correct answer)
50%
60%
80%

Correct answer: 70%

The ratio percentage test requires that the NHCE benefit percentage equal at least 70% of the HCE benefit percentage.

Question 42: Under IRC Section 416, a qualified retirement plan is considered 'top-heavy' when the present value of accrued benefits or account balances of key employees exceeds what percentage of total plan assets?

60% (Correct answer)
70%
75%
50%

Correct answer: 60%

A plan is top-heavy when key employees hold more than 60% of the aggregate present value of all accrued benefits or account balances under the plan.

Question 43: A client's 401(k) plan has failed the ADP test. The CPC recommends a corrective distribution. What is the deadline for making corrective distributions to avoid the 10% excise tax on excess contributions?

12 months after the close of the plan year
30 days after the close of the plan year
2½ months after the close of the plan year (Correct answer)
6 months after the close of the plan year

Correct answer: 2½ months after the close of the plan year

Corrective distributions of excess contributions from a failed ADP test must be made within 2½ months after the close of the plan year to avoid the 10% excise tax imposed on the employer.

Question 44: Under IRC Section 410(a), what is the maximum age and service requirement a qualified retirement plan may impose before allowing an employee to participate?

Age 25 with 1 year of service
Age 21 with 1 year of service (Correct answer)
Age 21 with 2 years of service
Age 18 with 6 months of service

Correct answer: Age 21 with 1 year of service

IRC 410(a) permits plans to require employees to be at least age 21 and complete 1 year of service (1,000 hours) before becoming eligible to participate.

Question 45: An employer wants to freeze a defined benefit plan while keeping it active. Which statement describes the correct approach?

A frozen plan is exempt from minimum funding requirements under IRC Section 430
A hard freeze stops future accruals for all participants; a soft freeze closes the plan to new entrants but allows current participants to continue accruing (Correct answer)
A freeze automatically terminates the plan and triggers PBGC insurance payout
All freezes require IRS approval via a determination letter

Correct answer: A hard freeze stops future accruals for all participants; a soft freeze closes the plan to new entrants but allows current participants to continue accruing

A hard freeze ceases all future benefit accruals for all participants, while a soft freeze closes the plan to new entrants but allows existing participants to continue accruing benefits.

Question 46: A 401(k) participant takes a hardship withdrawal. Which statement is correct under post-2019 rules?

The 6-month suspension of elective deferrals following a hardship withdrawal was eliminated (Correct answer)
The participant must repay the hardship amount within 3 years
The participant must take all available loans before a hardship withdrawal
Hardship withdrawals are always exempt from the 10% early withdrawal penalty

Correct answer: The 6-month suspension of elective deferrals following a hardship withdrawal was eliminated

The Treasury's 2019 final hardship regulations eliminated the mandatory 6-month deferral suspension following a hardship distribution.

Question 47: What is asset allocation?

Dividing investments among various asset classes (Correct answer)
Choosing only stocks
Avoiding investment diversification
Keeping all money in savings

Correct answer: Dividing investments among various asset classes

Asset allocation is an investment strategy that involves dividing an investment portfolio among different asset classes, such as stocks, bonds, and cash equivalents. The goal is to balance risk and reward by diversifying investments, which can help mitigate overall portfolio volatility and improve long-term returns. It's a key component of a sound investment strategy.

Question 48: The DOL's 'functional fiduciary' test determines fiduciary status based on:

The amount of compensation received from the plan
Whether the individual exercises discretionary authority or control over plan management or assets (Correct answer)
Whether the individual is named in the plan document
The job title assigned by the plan sponsor

Correct answer: Whether the individual exercises discretionary authority or control over plan management or assets

ERISA defines a fiduciary functionally—anyone who exercises discretionary authority over plan administration or management of plan assets is a fiduciary regardless of their title.

Question 49: Under SECURE 2.0, employers may make matching contributions on student loan repayments to 401(k), 403(b), SIMPLE IRA, or governmental 457(b) plans beginning in which year?

2026
2025
2023
2024 (Correct answer)

Correct answer: 2024

SECURE 2.0 Section 110 allows employers to treat qualified student loan payments as elective deferrals for purposes of employer matching contributions, effective for plan years beginning after December 31, 2023.

Question 50: Under ERISA Section 203, what is the maximum cliff vesting schedule permitted for employer matching contributions in a 401(k) plan?

2 years
6 years
5 years
3 years (Correct answer)

Correct answer: 3 years

ERISA requires that employer matching contributions vest under either 3-year cliff vesting or 6-year graded vesting (2-year cliff for SIMPLE 401(k) plans).

Question 51: Which of the following is considered a fixed-income investment?

Real estate
Bond (Correct answer)
Common stock
Mutual funds

Correct answer: Bond

A bond is a fixed-income investment where an investor loans money to an entity (typically corporate or governmental) that borrows the funds for a defined period at a variable or fixed interest rate. Bonds are called 'fixed-income' because they typically provide investors with regular, predictable interest payments, offering a more stable return compared to stocks.

Question 52: Which best describes the 'prudent man' standard?

Focus on personal opinions
Act with care and diligence (Correct answer)
Take significant investment risks
Avoid investment decisions

Correct answer: Act with care and diligence

The 'prudent man' standard, often referred to as the 'prudent expert' standard in ERISA, requires fiduciaries to act with the care, skill, prudence, and diligence that a prudent person familiar with such matters would use in similar circumstances. This means making informed decisions based on thorough research and professional advice, prioritizing the security and growth of plan assets for the benefit of participants.

Question 53: The average benefit test under IRC Section 410(b) consists of two prongs. Which of the following correctly identifies both prongs?

Nondiscriminatory classification and average benefit percentage test (Correct answer)
Minimum participation count and HCE/NHCE benefit ratio
Coverage ratio and allocation formula nondiscrimination
Ratio percentage and safe harbor comparison

Correct answer: Nondiscriminatory classification and average benefit percentage test

The average benefit test requires (1) a nondiscriminatory classification of employees and (2) that the average benefit percentage for NHCEs is at least 70% of the average benefit percentage for HCEs.

Question 54: A plan sponsor is considering a 'stretch' defined benefit plan design that maximizes contributions for older owners. What nondiscrimination issue should the CPC flag?

The plan cannot use a benefit formula based on final average pay
Age-weighted allocations must pass general nondiscrimination testing under IRC Section 401(a)(4) on an equivalent basis (Correct answer)
Plans covering only owners are exempt from all nondiscrimination requirements
The plan must provide the same dollar benefit to all participants regardless of age

Correct answer: Age-weighted allocations must pass general nondiscrimination testing under IRC Section 401(a)(4) on an equivalent basis

Age-weighted or cross-tested plan designs must demonstrate compliance with Section 401(a)(4) nondiscrimination requirements, often using general testing to show non-HCEs receive equivalent effective benefit rates.

Question 55: Under the DOL's investment advice fiduciary rule, a financial professional giving rollover recommendations is subject to fiduciary standards when the recommendation:

Is part of a regular business relationship and is individualized to the investor (Correct answer)
Is made in writing only
Involves only mutual funds and not other securities
Is provided free of charge without compensation

Correct answer: Is part of a regular business relationship and is individualized to the investor

The DOL's fiduciary rule applies when advice is provided as part of a regular business relationship, is individualized, and the adviser receives compensation directly or indirectly.

Question 56: Which scenario BEST demonstrates sequence-of-returns risk for a retiree drawing from a pension plan?

Earning 7% per year for 20 years consistently
Experiencing gains early in retirement followed by modest losses later
Experiencing large losses in early retirement years followed by gains in later years (Correct answer)
Receiving a fixed annuity payment each month

Correct answer: Experiencing large losses in early retirement years followed by gains in later years

Sequence-of-returns risk is greatest when large losses occur early in the distribution phase, as they deplete principal before markets recover.

Question 57: A client asks whether to adopt a safe harbor 401(k) plan. Which statement is correct regarding the safe harbor design?

Safe harbor plans eliminate all nondiscrimination testing including top-heavy rules
Safe harbor plans are only available to employers with fewer than 100 employees
Safe harbor plans require employer contributions of at least 5% of compensation for all eligible employees
Safe harbor plans are exempt from ADP and ACP testing but must still satisfy the top-heavy minimum contribution rules in most cases (Correct answer)

Correct answer: Safe harbor plans are exempt from ADP and ACP testing but must still satisfy the top-heavy minimum contribution rules in most cases

Safe harbor 401(k) plans are exempt from ADP/ACP testing but are generally still subject to top-heavy rules unless the only employer contributions are the safe harbor contributions.

Question 58: A participant's qualified plan account includes a life insurance policy. What portion of the premiums is currently taxable to the participant?

The pure insurance cost (P.S. 58 cost or Table 2001 rates) is taxable annually (Correct answer)
Premiums are taxable only when the death benefit is paid
None—all life insurance in a qualified plan is tax-free
100% of premiums are taxable in the year paid

Correct answer: The pure insurance cost (P.S. 58 cost or Table 2001 rates) is taxable annually

The cost of current life insurance protection (measured by IRS Table 2001 rates or insurer's lower published rates) is includible in the participant's gross income each year.

Question 59: A plan's adjusted funding target attainment percentage (AFTAP) falls below 60%. What benefit restriction is triggered?

All benefit accruals must cease immediately (Correct answer)
Lump-sum payments and accelerated benefit forms are restricted
The plan must be terminated within 30 days
No benefit payments can be made

Correct answer: All benefit accruals must cease immediately

When AFTAP falls below 60%, the plan must cease all future benefit accruals until the percentage is restored above the threshold.

Question 60: Under ERISA's co-fiduciary liability rules, a fiduciary can be held liable for another fiduciary's breach if the first fiduciary:

Was appointed by a different plan sponsor
Was unaware of the other fiduciary's actions
Knowingly participated in or concealed the breach (Correct answer)
Resigned from their fiduciary role before the breach occurred

Correct answer: Knowingly participated in or concealed the breach

ERISA Section 405(a) imposes co-fiduciary liability when a fiduciary knowingly participates in, enables, or conceals another fiduciary's breach.

Question 61: Under ERISA's duty of loyalty, a plan fiduciary must act:

Solely in the interest of plan participants and beneficiaries (Correct answer)
In the interest of the plan sponsor and participants equally
In the interest of the employer when the employer and participants have conflicting interests
In the interest of the plan's investment manager

Correct answer: Solely in the interest of plan participants and beneficiaries

ERISA's duty of loyalty requires fiduciaries to act solely in the interest of plan participants and beneficiaries, excluding consideration of employer or other party interests.

Question 62: The 'prudent expert' standard under ERISA differs from the common law 'prudent man' standard in that it requires:

Investment returns to match or exceed a specified benchmark
All investment decisions to be reviewed by an independent committee
Fiduciaries to hire outside experts for every investment decision
The care, skill, prudence, and diligence of a knowledgeable person familiar with pension matters (Correct answer)

Correct answer: The care, skill, prudence, and diligence of a knowledgeable person familiar with pension matters

ERISA's prudent expert standard is higher than the common law prudent man standard—it requires the skill of a knowledgeable person familiar with matters of pension fund management.

Question 63: What is the primary purpose of a floor-offset plan design?

To provide a guaranteed return on participant investments
To allow a DB plan benefit to be offset by the value of a DC plan account (Correct answer)
To ensure top-heavy minimum benefits are met
To integrate plan benefits with Social Security

Correct answer: To allow a DB plan benefit to be offset by the value of a DC plan account

A floor-offset plan pairs a DB plan (providing a benefit floor) with a DC plan, reducing the DB benefit by the actuarial equivalent of the DC account balance.

Question 64: A pension plan holds alternative investments including private equity and hedge funds primarily to achieve:

Guaranteed principal protection
Daily liquidity for benefit payments
Reduced PBGC premiums
Enhanced returns and diversification through low correlation with public markets (Correct answer)

Correct answer: Enhanced returns and diversification through low correlation with public markets

Alternatives offer return premiums (illiquidity premium) and low correlations to public equity and bonds, improving portfolio efficiency.

Question 65: Under the ACA's employer shared responsibility provisions, applicable large employers (ALEs) with 50 or more full-time equivalents must offer minimum essential coverage to what percentage of full-time employees to avoid the Section 4980H(a) penalty?

70%
80%
100%
95% (Correct answer)

Correct answer: 95%

Under IRC Section 4980H(a), ALEs must offer minimum essential coverage to at least 95% of full-time employees (and their dependents) to avoid the employer mandate penalty.

Question 66: What is the minimum required contribution for a single-employer defined benefit plan under IRC Section 430?

The greater of the target normal cost or the shortfall amortization charge (Correct answer)
10% of plan assets
The unit credit normal cost only
The funding shortfall amortized over 7 years

Correct answer: The greater of the target normal cost or the shortfall amortization charge

IRC Section 430 requires contributions equal to the greater of the target normal cost (net of expected plan expenses) or the shortfall amortization charge.

Question 67: What is a 'distress termination' of a defined benefit plan?

A voluntary termination where the employer is in financial distress and cannot fund all benefit liabilities (Correct answer)
A termination initiated when the plan is overfunded
A PBGC-initiated termination to protect participants when the plan is severely underfunded
A termination triggered by a plan amendment reducing benefits

Correct answer: A voluntary termination where the employer is in financial distress and cannot fund all benefit liabilities

A distress termination is a voluntary termination initiated by an employer in financial distress (e.g., bankruptcy) that cannot satisfy all plan liabilities; the PBGC steps in as trustee if liabilities exceed assets.

Question 68: A participant receives a plan distribution and rolls it over to an IRA within 60 days. The plan withheld 20% for taxes. What happens to the withheld amount?

It is credited to the participant's IRA directly by the plan trustee
It is permanently forfeited to the IRS
It must be replaced from other funds to complete a full rollover; otherwise the withheld portion is taxable (Correct answer)
It is automatically returned to the participant after filing a tax return

Correct answer: It must be replaced from other funds to complete a full rollover; otherwise the withheld portion is taxable

To roll over the full distribution and avoid taxation, the participant must contribute funds equal to the 20% withheld from outside sources; the withheld amount can be reclaimed on the tax return but the rollover must be complete within 60 days.

Question 69: What PBGC form must be filed to initiate a standard termination of a single-employer defined benefit plan?

IRS Form 5310
PBGC Form 600
PBGC Form 10
PBGC Form 500 (Correct answer)

Correct answer: PBGC Form 500

PBGC Form 500 (Standard Termination Notice) is filed with the PBGC to begin the standard termination process for a single-employer defined benefit plan.

Question 70: Which plan distribution option allows a participant to receive employer stock at its cost basis and defer tax on the net unrealized appreciation (NUA) until the stock is sold?

Lump-sum distribution with NUA treatment under IRC Section 402(e)(4) (Correct answer)
In-service withdrawal after age 59½
Installment distribution over 10 years
Direct rollover to an IRA

Correct answer: Lump-sum distribution with NUA treatment under IRC Section 402(e)(4)

IRC Section 402(e)(4) allows NUA on employer stock distributed in a lump sum to be taxed at long-term capital gains rates rather than ordinary income rates when the stock is later sold.

Question 71: A plan merger must not decrease the accrued benefits of any participant. Which ERISA section governs this requirement?

ERISA Section 208 (Correct answer)
ERISA Section 402(b)
ERISA Section 514
ERISA Section 204(g) (anti-cutback)

Correct answer: ERISA Section 208

ERISA Section 208 requires that no plan merger, consolidation, or transfer of assets reduce any participant's accrued benefits below what they would have received had the plan terminated on the merger date.

Question 72: A plan's 'funding target' under PPA 2006 is measured using what interest rate?

The 30-year Treasury rate
The Federal short-term rate plus 3%
The plan's assumed investment return
24-month average segment rates based on corporate bond yields (Correct answer)

Correct answer: 24-month average segment rates based on corporate bond yields

PPA 2006 requires use of three 24-month average segment rates derived from investment-grade corporate bond yields to discount funding liabilities.

Question 73: Under the Frozen Initial Liability (FIL) actuarial cost method, how are actuarial gains and losses treated?

They adjust the normal cost for future years but do not create separate amortization bases (Correct answer)
They are recognized immediately in the year they occur
They are amortized separately over 15 years
They are allocated entirely to past service liability

Correct answer: They adjust the normal cost for future years but do not create separate amortization bases

Under FIL, gains and losses are absorbed into future normal cost calculations rather than creating separate amortization layers.

Question 74: When a 401(k) plan terminates and a successor plan exists, can participants receive their accounts as cash distributions without the 10% early withdrawal penalty?

No, the distribution must occur within 60 days of termination
Yes, plan termination is always an exception to the 10% penalty
No, a successor plan blocks penalty-free distributions; participants must roll over or wait until age 59½ (Correct answer)
Yes, but only for participants with fewer than 5 years of service

Correct answer: No, a successor plan blocks penalty-free distributions; participants must roll over or wait until age 59½

The plan termination exception to the 10% early withdrawal penalty does not apply to 401(k) plans if the employer establishes or maintains a successor plan within 12 months after distributing assets.

Question 75: A plan sponsor must obtain a waiver of minimum funding requirements from the IRS when?

Making the minimum required contribution would impose a substantial business hardship (Correct answer)
The plan is overfunded by more than 10%
Investment losses exceed 20% in a single year
The plan has fewer than 100 participants

Correct answer: Making the minimum required contribution would impose a substantial business hardship

IRC Section 412(c) allows a funding waiver when a plan sponsor demonstrates that meeting the minimum contribution requirement would cause substantial business hardship.

Question 76: Which actuarial cost method spreads the present value of future benefits as a level percentage of projected future compensation?

Entry Age Normal (Correct answer)
Aggregate
Unit Credit
Frozen Initial Liability

Correct answer: Entry Age Normal

The Entry Age Normal method allocates pension costs as a level percentage of pay from the employee's entry age to expected retirement.

Question 77: What does 'experience gain' mean in the context of actuarial valuations?

Additional contributions made above the minimum required
Investment returns exceeding the assumed rate
Actual plan experience more favorable than actuarial assumptions (Correct answer)
Increase in plan assets due to new participant contributions

Correct answer: Actual plan experience more favorable than actuarial assumptions

An actuarial experience gain occurs when actual demographic, economic, or investment experience is more favorable than the assumptions used in the prior valuation.

Question 78: For vesting purposes under ERISA, a 'year of service' is generally defined as a 12-consecutive-month period in which an employee completes at least how many hours of service?

1,250 hours
1,000 hours (Correct answer)
750 hours
500 hours

Correct answer: 1,000 hours

An employee must complete at least 1,000 hours of service within a 12-consecutive-month period to be credited with a year of service for vesting purposes.

Question 79: A plan uses a 7% investment return assumption. If actual returns average 5% over 5 years, the resulting actuarial loss is reflected how?

Charged entirely to current-year plan expenses
Ignored if plan assets exceed 80% of funding target
Amortized over future years as part of actuarial gains/losses or immediately under certain methods (Correct answer)
Immediately as a one-time contribution surcharge

Correct answer: Amortized over future years as part of actuarial gains/losses or immediately under certain methods

Actuarial losses from investment underperformance are typically recognized through the funding mechanism over future years, either via experience amortization or immediate recognition depending on the cost method.

Question 80: What is the maximum period over which a funding shortfall amortization charge can be spread under IRC Section 430?

5 years
15 years
10 years
7 years (Correct answer)

Correct answer: 7 years

Under IRC Section 430, shortfall amortization bases are amortized over 7 years from the year they are established.

Question 81: A plan administrator fails to provide a participant with a requested Summary Plan Description within the ERISA-mandated timeframe. The maximum civil penalty per day is:

$110 (Correct answer)
$250
$50
$1,000

Correct answer: $110

The DOL can assess a civil penalty of up to $110 per day (periodically adjusted for inflation) for failing to provide required documents to participants upon request.

Question 82: Which federal law primarily regulates employee benefits plans?

ADA
ERISA (Correct answer)
OSHA
FMLA

Correct answer: ERISA

The Employee Retirement Income Security Act (ERISA) of 1974 is the foundational federal law governing most private-sector employee benefit plans. It sets minimum standards for pension and health plans, protecting participants and beneficiaries by requiring fiduciaries to act prudently and in their best interest. ERISA's comprehensive framework addresses reporting, disclosure, and fiduciary responsibilities.

Question 83: The '133-1/3 percent rule' for defined benefit plan accrual under IRC Section 411(b) prohibits the rate of future benefit accrual from exceeding what percentage of the rate of accrual for prior years?

110%
150%
133-1/3% (Correct answer)
120%

Correct answer: 133-1/3%

The 133-1/3% rule prevents back-loaded accruals by capping the annual accrual rate for later years at no more than 133.33% of the accrual rate for any earlier year.

Question 84: Which nondiscrimination test specifically evaluates whether a plan provides benefits, rights, and features that do not discriminate in favor of highly compensated employees?

ADP test
General test under IRC §401(a)(4) (Correct answer)
Top-heavy test under IRC §416
Coverage test under IRC §410(b)

Correct answer: General test under IRC §401(a)(4)

IRC §401(a)(4) requires that contributions or benefits, rights, and features be nondiscriminatory, which is tested using the general test or safe harbor methods.

Question 85: Which two alternative tests may a qualified plan satisfy to meet the IRC Section 410(b) minimum coverage requirements?

ADP test or ACP test
Ratio percentage test or average benefit test (Correct answer)
Top-heavy test or minimum participation test
Safe harbor test or benefit parity test

Correct answer: Ratio percentage test or average benefit test

Under IRC 410(b), a plan must satisfy either the ratio percentage test or the average benefit test to demonstrate it does not discriminate in favor of highly compensated employees.

Question 86: Under ASPPA's Code of Professional Conduct, what obligation does a CPC have when providing written advice?

Written advice must be reviewed by an attorney before delivery
Written advice requires a disclaimer that it is not legal advice
Written advice is optional; verbal advice is always sufficient
Written advice must be balanced, state material assumptions, and identify significant limitations (Correct answer)

Correct answer: Written advice must be balanced, state material assumptions, and identify significant limitations

ASPPA's Code requires that written professional advice be complete, accurate, and clearly state material assumptions, methods, and significant limitations or uncertainties.

Question 87: A CPC is advising on the establishment of a Multiple Employer Plan (MEP). Which statement is correct regarding open MEPs under SECURE Act?

Open MEPs are only available to governmental employers
Open MEPs are limited to employers in the same industry or geographic area
Open MEPs allow unrelated employers to join a single plan managed by a Pooled Plan Provider (PPP) (Correct answer)
Open MEPs eliminate all Form 5500 filing requirements for participating employers

Correct answer: Open MEPs allow unrelated employers to join a single plan managed by a Pooled Plan Provider (PPP)

The SECURE Act created Pooled Employer Plans (PEPs), allowing unrelated employers to participate in a single plan managed by a Pooled Plan Provider registered with the DOL and IRS.

Question 88: When a plan fiduciary discovers that a prohibited transaction has already occurred, the most appropriate first step is to:

Transfer the plan to a different plan sponsor
Immediately terminate the service provider involved
Seek legal counsel and consider voluntary correction through DOL programs (Correct answer)
Remove the information from plan records to avoid penalties

Correct answer: Seek legal counsel and consider voluntary correction through DOL programs

The DOL's Voluntary Fiduciary Correction Program (VFCP) allows fiduciaries to correct prohibited transactions and receive a no-action letter, reducing exposure to penalties.

Question 89: A fiduciary breach results in a $200,000 loss to the plan. Under ERISA Section 409, the breaching fiduciary is personally liable for:

50% of the loss plus legal costs
The full $200,000 loss plus any profits made through the breach and equitable relief (Correct answer)
The lesser of the loss or the fiduciary's annual compensation
Only the amount they personally benefited from the breach

Correct answer: The full $200,000 loss plus any profits made through the breach and equitable relief

ERISA Section 409 holds breaching fiduciaries personally liable to restore all plan losses and disgorge any profits realized through the breach, plus the plan may seek other equitable relief.

Question 90: What is the IRS filing required when a qualified plan terminates to request a determination that the plan is still qualified at termination?

Form 5500-SUP
Form 5310 (Application for Determination for Terminating Plan) (Correct answer)
Form 5330
Form 1099-R

Correct answer: Form 5310 (Application for Determination for Terminating Plan)

IRS Form 5310 is filed to request a determination letter confirming the plan was qualified at the time of its termination.

Question 91: Which plan feature triggers the PBGC's variable-rate premium in addition to the flat-rate per-participant premium?

Plan having more than 100 participants
Electing to use the alternative funding standard
Failure to pass the coverage test
Unfunded vested benefits in a single-employer DB plan (Correct answer)

Correct answer: Unfunded vested benefits in a single-employer DB plan

PBGC charges a variable-rate premium based on the amount of unfunded vested benefits in single-employer defined benefit plans.

Question 92: Under the look-back year rule for determining HCE status, a compensation threshold of $155,000 (2024) applies to which year?

The current plan year
The plan year two years prior
Any of the last three years at the employer's election
The preceding calendar year (Correct answer)

Correct answer: The preceding calendar year

HCE status based on compensation uses the preceding year's compensation compared to the threshold in effect for the preceding year.

Question 93: A plan fiduciary who delegates investment management to a qualified investment manager under ERISA Section 402(c)(3) is relieved of liability for:

Acts and omissions of the investment manager once properly appointed (Correct answer)
Ensuring the investment manager is a registered investment adviser
Annual review of the investment manager's performance
The initial selection of the investment manager

Correct answer: Acts and omissions of the investment manager once properly appointed

Once a named fiduciary properly appoints a qualified investment manager, the appointing fiduciary is not liable for acts or omissions of that manager.

Question 94: How can fiduciaries demonstrate compliance?

Avoid making decisions
Rely on memory
Document decisions and processes (Correct answer)
Minimize written records

Correct answer: Document decisions and processes

Fiduciaries have a legal obligation to act in the best interest of plan participants. Documenting decisions, the rationale behind them, and the processes followed provides concrete evidence of due diligence and prudent management. This record-keeping is crucial for demonstrating compliance with ERISA and other regulations, especially if challenged by regulators or participants.

Question 95: Which parties must receive Notice of Intent to Terminate (NOIT) in a standard defined benefit plan termination?

All plan participants, beneficiaries, and alternate payees (but not the PBGC)
Plan participants, beneficiaries, alternate payees, and unions representing plan participants (Correct answer)
Only vested participants currently receiving benefits
Only active participants and the IRS

Correct answer: Plan participants, beneficiaries, alternate payees, and unions representing plan participants

The NOIT must be provided to all plan participants, beneficiaries currently receiving benefits, alternate payees under QDROs, and any union representing plan employees.

Question 96: What happens to excess assets in an overfunded defined benefit plan upon plan termination?

They must be distributed pro-rata to all participants
They remain in trust indefinitely
They are transferred to the PBGC automatically
They revert to the employer subject to a 50% excise tax unless transferred to a qualified replacement plan (Correct answer)

Correct answer: They revert to the employer subject to a 50% excise tax unless transferred to a qualified replacement plan

Excess assets reverting to the employer are subject to a 20% excise tax (50% if no qualified replacement plan receives at least 25% of the surplus), in addition to regular income tax.

Question 97: Under IRC Section 415, what is the 2024 annual addition limit for defined contribution plans?

$69,000 (Correct answer)
$73,500
$61,000
$66,000

Correct answer: $69,000

For 2024, IRC Section 415(c) limits total annual additions to defined contribution plans to $69,000 (or 100% of compensation if less).

Question 98: The concept of 'settlor functions' is important in fiduciary analysis because:

Settlor functions trigger the highest level of fiduciary scrutiny
Decisions about plan design and establishment are generally not fiduciary acts (Correct answer)
Only settlor functions can be delegated to third parties
Settlor functions automatically make the employer a plan fiduciary

Correct answer: Decisions about plan design and establishment are generally not fiduciary acts

Courts and the DOL distinguish between settlor functions (plan design, amendment, termination) which are business decisions, and fiduciary functions (plan administration) which trigger ERISA duties.

Question 99: What is the purpose of the 'credit balance' in a defined benefit plan's funding standard account?

To track excess contributions that can offset future minimum required contributions (Correct answer)
To satisfy PBGC variable-rate premium obligations
To reduce the plan's vested benefit obligation
To record investment gains for distribution to participants

Correct answer: To track excess contributions that can offset future minimum required contributions

A funding standard account credit balance represents contributions made in excess of the minimum required amount and can be applied to reduce future minimum contributions.

Question 100: Under IRC Section 416, which of the following employees is classified as a 'key employee' for top-heavy testing purposes?

Any employee in the top 20% of compensation who is a plan participant
Any highly compensated employee as defined under IRC Section 414(q)
Any employee earning more than $100,000 in the prior year
A 5% owner, a 1% owner earning over $150,000, or an officer earning more than $220,000 (2024 threshold) (Correct answer)

Correct answer: A 5% owner, a 1% owner earning over $150,000, or an officer earning more than $220,000 (2024 threshold)

Key employees under IRC 416 include 5% owners, 1% owners with compensation over $150,000, and officers whose compensation exceeds the indexed threshold ($220,000 for 2024).

Question 101: A CPC is helping a plan sponsor decide whether to outsource plan fiduciary responsibility to a 3(38) investment manager. What does a 3(38) manager provide that a 3(21) advisor does not?

Greater fund selection than an in-house committee
Lower investment management fees
Exemption from Form 5500 Schedule C reporting
Discretionary investment authority and full fiduciary responsibility for investment decisions (Correct answer)

Correct answer: Discretionary investment authority and full fiduciary responsibility for investment decisions

A 3(38) investment manager takes on full discretionary control and fiduciary responsibility for investment selection, relieving the plan sponsor of investment fiduciary liability; a 3(21) advisor only provides non-discretionary recommendations.

ASPPA Certified Pension Consultant (CPC) Examination

The CPC is ASPPA's premier credential for retirement plan professionals, assessing mastery of advanced plan design, consulting, defined benefit and defined contribution administration, fiduciary responsibilities, and all aspects of qualified retirement plans.

100

Questions

270 min

Time Limit

70%

To Pass

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