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
Under ERISA, which action by a plan fiduciary constitutes a prohibited transaction?
Answer: Lending plan assets to a party in interest at market rates without exemption
ERISA Section 406 prohibits loans of plan assets to parties in interest unless a specific statutory or administrative exemption applies.
The 'exclusive benefit' rule under ERISA Section 404 requires that plan assets be used:
Answer: Exclusively for the benefit of participants and their beneficiaries
ERISA Section 404(a)(1) mandates that fiduciaries act solely in the interest of participants and beneficiaries for the exclusive purpose of providing benefits.
A plan fiduciary who delegates investment management to a qualified investment manager under ERISA Section 402(c)(3) is relieved of liability for:
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.
Which document establishes the investment guidelines and objectives that a plan's investment manager must follow?
Answer: Investment Policy Statement (IPS)
An Investment Policy Statement sets forth the plan's investment goals, risk tolerance, asset allocation targets, and manager selection criteria.
Under ERISA's co-fiduciary liability rules, a fiduciary can be held liable for another fiduciary's breach if the first fiduciary:
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.
The DOL's 'functional fiduciary' test determines fiduciary status based on:
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.
When a plan fiduciary discovers that a prohibited transaction has already occurred, the most appropriate first step is to:
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.