Regulatory and Compliance
What the exam expects
Compliance questions test your command of ERISA and Internal Revenue Code requirements and the correction tools available when something goes wrong. Know the fiduciary duties - loyalty, prudence, diversification, and following plan documents - and how they attach to plan sponsors and service providers. Understand reporting obligations (Form 5500, Schedule H, audit thresholds), bonding, and the participant notice regime. Know the correction programs well enough to choose the right remedy for a specific failure.
Concepts to master
- ERISA fiduciary status and prohibited transactions, including party-in-interest issues.
- Form 5500 filing, the large-plan audit requirement, and ERISA fidelity bonding.
- Timely deposit of participant deferrals and the small-plan safe harbor.
- Correction of operational failures, including self-correction for eligible plans.
- Nondiscrimination testing failures and refund mechanics.
Traps
The most common trap is treating a correction as discretionary when the plan's document or the correction program imposes conditions. Another is confusing a prohibited transaction with a mere reporting error - a late deferral deposit is both an operational failure and a fiduciary concern. Questions also test whether you know that plan document language, not practice, defines the failure; consistent practice that conflicts with the document is still an operational error. Watch for answers that propose amending the plan retroactively to fix an operational mistake without following correction procedures.
Worked example
Deferrals were withheld in March but deposited in June. Rule of thumb: the failure is an operational and fiduciary issue, not just a paperwork problem. Determine the earliest date the amounts could reasonably have been segregated, restore lost earnings, and document the correction. Choosing the correction path depends on the plan's eligibility for self-correction and the size and nature of the failure.