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Fiduciary Responsibility & Compliance Standards Flashcards

7 cards from real CPC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Fiduciary Responsibility & Compliance Standards flashcards as text

  1. A pension consultant recommends that a plan trustee invest 60% of plan assets in the employer's own stock. This recommendation most likely violates which ERISA principle?

    Answer: The diversification requirement under Section 404(a)(1)(C)

    ERISA Section 404(a)(1)(C) requires fiduciaries to diversify plan investments to minimize the risk of large losses, and concentrating 60% in employer stock would likely violate this duty.

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

    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.

  3. Which exemption allows a plan to pay reasonable compensation to a party in interest for office space or legal, accounting, or other services?

    Answer: ERISA Section 408(b)(2) statutory exemption

    ERISA Section 408(b)(2) provides a statutory exemption allowing plans to pay reasonable compensation to parties in interest for necessary services including office space, legal, and accounting services.

  4. Under ERISA Section 404(c), a plan can shift investment decision liability to participants if the plan provides:

    Answer: At least 3 diversified investment options with different risk/return profiles and sufficient investment information

    Section 404(c) protection requires at least three diversified investment options with materially different risk/return profiles, adequate investment information, and the ability to give investment instructions.

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

    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.

  6. The DOL's QPAM (Qualified Professional Asset Manager) exemption primarily benefits plans by allowing:

    Answer: Asset managers to engage in certain transactions with parties in interest on behalf of the plan

    PTE 84-14 (QPAM exemption) permits qualified professional asset managers to enter into transactions with parties in interest that would otherwise be prohibited under ERISA Section 406.

  7. A plan fiduciary who also serves as an employee of the plan sponsor faces a potential conflict of interest most acutely when:

    Answer: Deciding whether to sue the employer for a breach of the employer's own obligations to the plan

    A fiduciary who is also a company employee faces a clear conflict when deciding whether to take legal action against the employer, since their employment relationship may compromise their fiduciary independence.