CPC CPC Ethics & Professional Standards 1 — Questions and Answers
Question 1: Which professional organization publishes the Code of Professional Conduct that governs enrolled actuaries working on pension plans?
- The American Academy of Actuaries (AAA) (Correct answer)
- The Society of Actuaries (SOA)
- The American Society of Pension Professionals & Actuaries (ASPPA)
- The Joint Board for the Enrollment of Actuaries (JBEA)
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 2: An enrolled actuary signs a Schedule SB for a plan with a known material actuarial error. What is the correct professional response?
- Sign the form and disclose the error in a footnote
- Refuse to sign and advise the plan administrator of the error (Correct answer)
- Correct the error and file an amended return without notifying the IRS
- Sign the form because the plan administrator is ultimately responsible
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 3: A CPC who discovers that a plan sponsor has engaged in a prohibited transaction should do what?
- Ignore it if the amount is below $10,000
- Advise the plan sponsor of the violation and recommend corrective action, including VCP or VFCP filing (Correct answer)
- Report it immediately and directly to the DOL without informing the client
- Continue advising as normal since the CPC is not a fiduciary
Correct answer: Advise the plan sponsor of the violation and recommend corrective action, including VCP or VFCP filing
A CPC should inform the plan sponsor of the prohibited transaction, advise on the consequences, and recommend available correction programs such as the DOL's Voluntary Fiduciary Correction Program (VFCP).
Question 4: Under ASPPA's Code of Professional Conduct, what obligation does a CPC have when providing written advice?
- Written advice is optional; verbal advice is always sufficient
- Written advice must be balanced, state material assumptions, and identify significant limitations (Correct answer)
- Written advice requires a disclaimer that it is not legal advice
- Written advice must be reviewed by an attorney before delivery
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 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?
- Keep the fee confidential to avoid conflicts of interest
- Disclose the fee arrangement to plan fiduciaries and ensure the arrangement is reasonable (Correct answer)
- Return the fee within 30 days
- File Form 5500 Schedule C disclosing the fee
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 primary purpose of ASPPA's CPE (continuing professional education) requirements for CPC credential holders?
- To increase ASPPA membership revenue
- To ensure credential holders maintain current knowledge of laws, regulations, and best practices relevant to their work (Correct answer)
- To qualify CPCs for promotion to senior actuarial roles
- To satisfy IRS enrolled actuary CE requirements only
Correct answer: To ensure credential holders maintain current knowledge of laws, regulations, and best practices relevant to their work
CPE requirements ensure that CPC credential holders remain current with evolving pension law, regulations, and professional standards essential to competent client service.
CPC CPC Ethics & Professional Standards 1
Which professional organization publishes the Code of Professional Conduct that governs enrolled actuaries working on pension plans?