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Question 1Pension Plan Administration

Under ERISA, a pension plan's summary plan description (SPD) must generally be furnished to participants within how many days after the plan is established?

  1. 120 days Correct answer.
  2. 90 days
  3. 60 days
  4. 30 days

Explanation

ERISA requires the plan administrator to furnish the SPD within 120 days after the plan is established, and to new participants within 90 days of coverage. The 120-day rule applies to the plan-level obligation.

Question 2Pension Plan Administration

Which of the following is the primary fiduciary duty standard that ERISA imposes on plan fiduciaries when discharging their responsibilities?

  1. Following the instructions of the largest participant group
  2. Maximizing the plan sponsor's tax deductions
  3. Guaranteeing a minimum investment return each year
  4. Acting with the care, skill, prudence, and diligence of a prudent person familiar with such matters Correct answer.

Explanation

ERISA's prudence standard requires fiduciaries to act with the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use. It is a conduct standard, not a results guarantee.

Question 3Pension Plan Administration

A defined benefit plan participant's accrued benefit is generally expressed as which of the following?

  1. The sum of participant elective deferrals
  2. The account balance attributable to employer contributions
  3. The present value of all projected future contributions
  4. A monthly benefit payable at normal retirement age Correct answer.

Explanation

In a defined benefit plan, the accrued benefit is typically stated as an annual or monthly benefit commencing at normal retirement age. Account balances are characteristic of defined contribution plans.

Question 4Pension Plan Administration

Under the Internal Revenue Code, a qualified plan must satisfy which vesting schedule for employer nonelective contributions in a defined benefit plan?

  1. 10-year graded only
  2. Either 3-year cliff or 2-to-6-year graded Correct answer.
  3. 5-year cliff only
  4. Immediate 100% vesting at all times

Explanation

For defined benefit plans, employer-derived benefits must vest at least as fast as either a 3-year cliff or a 2-to-6-year graded schedule under the Code's minimum vesting standards.

Question 5Pension Plan Administration

Which annual return/report form must most pension plans file with the Department of Labor under Title I of ERISA?

  1. Form W-2
  2. Form 1099-R
  3. Form 5500 Correct answer.
  4. Form 941

Explanation

Form 5500 is the annual return/report used to satisfy ERISA and IRS reporting requirements for employee benefit plans. The other forms serve unrelated tax withholding or wage reporting purposes.

Question 6Pension Plan Administration

A participant loan from a qualified plan is generally treated as a taxable distribution unless it is repaid within what maximum period?

  1. Ten years in all cases
  2. Five years, except for loans used to acquire a principal residence Correct answer.
  3. One year in all cases
  4. Twenty years for any purpose

Explanation

Plan loans must generally be repaid within five years to avoid treatment as a distribution, with an exception allowing longer repayment for loans used to purchase a principal residence.

Question 7Pension Plan Administration

Under ERISA, the plan administrator must provide a participant with a copy of the plan's summary annual report (SAR) within how many months after the end of the plan year?

  1. Nine months Correct answer.
  2. Twelve months
  3. Six months
  4. Three months

Explanation

The summary annual report must generally be furnished within nine months after the close of the plan year. It summarizes the plan's annual financial information from Form 5500.

Question 8Pension Plan Administration

Which of the following best describes a plan's normal retirement age for a defined benefit plan under ERISA?

  1. The age specified in the plan at which a participant may retire with an unreduced accrued benefit Correct answer.
  2. The earliest age at which a participant may take any distribution
  3. The age at which the plan sponsor may terminate the plan
  4. The age at which Social Security benefits begin

Explanation

Normal retirement age is the age stated in the plan at which participants may retire with an unreduced benefit, subject to ERISA limits. It is a plan-defined term, not tied automatically to Social Security.

Question 9Pension Plan Administration

A plan sponsor wants to correct an operational failure where a participant was incorrectly excluded from the plan. Which correction principle generally applies under the IRS Employee Plans Compliance Resolution System (EPCRS)?

  1. Restore the participant to the position the participant would have been in had the failure not occurred Correct answer.
  2. Refund all contributions to every participant
  3. Terminate the plan to avoid further liability
  4. Simply document the error and take no further action

Explanation

EPCRS corrections generally seek to restore affected participants to the position they would have occupied absent the failure, often through corrective contributions or distributions. Documentation alone does not remedy an operational failure.

Question 10Pension Plan Administration

A participant requests a copy of the plan document. Under ERISA, the plan administrator must generally respond within how many days?

  1. 10 days
  2. 60 days
  3. 30 days Correct answer.
  4. 90 days

Explanation

ERISA requires the plan administrator to furnish requested plan documents within 30 days of a written request, subject to statutory penalties for delay.

Question 11Pension Plan Administration

Which of the following contributions to a qualified plan is subject to the annual compensation limit under Code Section 401(a)(17)?

  1. Nonelective employer contributions made above the limit
  2. Employer matching contributions Correct answer.
  3. Participant elective deferrals
  4. All of the above are subject to the limit

Explanation

The Section 401(a)(17) compensation limit caps the amount of compensation that may be taken into account for any contribution or benefit calculation, including matching contributions. It applies broadly to compensation-based allocations.

Question 12Pension Plan Administration

A defined benefit plan uses a 5-year cliff vesting schedule. A participant terminates after 4 years and 11 months of service. What is the participant's vested percentage?

  1. 100%
  2. 0% Correct answer.
  3. 80%
  4. 20%

Explanation

Under a 5-year cliff schedule, no vesting occurs until the participant completes five years of service. Terminating before that point results in a 0% vested benefit.

Question 13Pension Plan Administration

Which of the following is a required element of a qualified domestic relations order (QDRO)?

  1. It must specify the amount or percentage of the participant's benefit payable to the alternate payee Correct answer.
  2. It must be approved by the plan sponsor's board of directors
  3. It must waive the participant's right to a spousal benefit
  4. It must be filed with the Department of Labor before it takes effect

Explanation

A QDRO must clearly specify the amount or percentage of benefits to be paid to the alternate payee and must otherwise meet the statutory requirements. Board approval or DOL filing is not required.

Question 14Pension Plan Administration

A plan's summary plan description must be updated and redistributed to participants within how many days after a material modification?

  1. 30 days after the modification
  2. 210 days after the end of the plan year in which the modification was adopted Correct answer.
  3. 90 days after the modification
  4. 60 days after the modification

Explanation

A summary of material modifications must generally be furnished within 210 days after the end of the plan year in which the change was adopted. This gives plans time to summarize mid-year changes.

Question 15Pension Plan Administration

Which of the following best describes the purpose of the annual funding notice required for defined benefit plans?

  1. To disclose the plan's funded status and related financial information to participants and others Correct answer.
  2. To list each participant's individual account balance
  3. To report participant deferral amounts to the IRS
  4. To certify that the plan is exempt from ERISA

Explanation

The annual funding notice informs participants, beneficiaries, and others about the plan's funded status and financial health. It is a disclosure requirement specific to defined benefit plans.

Question 16Pension Plan Administration

Under ERISA, a fiduciary may generally be held personally liable for breaches of duty. Which remedy is available to the plan?

  1. Criminal prosecution by the plan sponsor
  2. Reduction of the fiduciary's personal income tax
  3. Automatic termination of the plan
  4. Restitution of losses to the plan and disgorgement of profits Correct answer.

Explanation

ERISA authorizes equitable relief, including making the plan whole for losses and requiring disgorgement of profits obtained through a breach. Personal liability is a core enforcement mechanism.

Question 17Pension Plan Administration

A participant in a 401(k) plan wants to take a hardship distribution. Which condition must generally be satisfied?

  1. The participant must be at least 59½ years old
  2. The distribution is made on account of an immediate and heavy financial need and is limited to the amount necessary Correct answer.
  3. The participant must have terminated employment
  4. The distribution must be repaid within 30 days

Explanation

Hardship distributions require an immediate and heavy financial need and are limited to the amount needed to satisfy it, plus taxes and penalties. Age 59½ and termination are not prerequisites.

Question 18Pension Plan Administration

Which of the following statements about required minimum distributions (RMDs) from a qualified plan is correct?

  1. RMDs generally must begin by the required beginning date, which is April 1 of the year following the year the participant attains the applicable age Correct answer.
  2. RMDs are calculated using the participant's life expectancy alone
  3. RMDs apply only to Roth accounts
  4. RMDs may be deferred indefinitely if the participant remains employed

Explanation

RMDs must generally begin by the required beginning date, tied to attainment of the applicable age, with the first distribution deadline falling on April 1 of the following year. The calculation uses uniform tables, not merely the participant's own life expectancy.

Question 19Pension Plan Administration

A plan administrator is reviewing whether a service provider arrangement constitutes a prohibited transaction. Which factor is most relevant?

  1. Whether the service provider has fewer than 100 employees
  2. Whether the arrangement involves a party in interest receiving unreasonable compensation from the plan Correct answer.
  3. Whether the service provider is located in the same state as the plan sponsor
  4. Whether the arrangement was approved by a majority of participants

Explanation

Prohibited transaction rules focus on dealings between the plan and parties in interest, including whether compensation is reasonable and whether the arrangement benefits the plan. Geographic location or provider size is not the test.

Question 20Pension Plan Administration

Which of the following best describes the anti-cutback rule under Code Section 411(d)(6)?

  1. A plan may not amend its vesting schedule for future service
  2. A plan may not change its investment menu
  3. A plan may not increase benefits for highly compensated employees
  4. A plan amendment may not reduce a participant's accrued benefit Correct answer.

Explanation

The anti-cutback rule prohibits plan amendments that reduce accrued benefits, including certain early retirement benefits and optional forms of benefit. It protects benefits already earned.

Question 21Pension Plan Administration

A defined benefit plan is subject to the minimum funding requirements of Code Section 412. Which of the following best describes the consequence of failing to meet the minimum funding standard?

  1. The plan automatically loses its tax-qualified status
  2. An excise tax may be imposed on the employer unless a funding waiver is obtained Correct answer.
  3. The plan must distribute all assets to participants
  4. All participants become immediately 100% vested

Explanation

Failure to satisfy minimum funding generally triggers an excise tax on the employer, though a funding waiver may be available. Loss of qualification is not the automatic result.

Question 22Pension Plan Administration

A plan fiduciary is considering an investment in a collective investment trust. Which statement best reflects the fiduciary's obligation?

  1. The fiduciary must evaluate the investment prudently and monitor it as part of a diversified portfolio Correct answer.
  2. The fiduciary must obtain participant approval before investing
  3. The fiduciary has no duty because collective trusts are exempt from ERISA
  4. The fiduciary may rely solely on the trustee's reputation

Explanation

Selecting and monitoring investments, including collective trusts, requires prudent evaluation and ongoing monitoring consistent with the plan's portfolio. Reputation alone is insufficient, and participant approval is not required.

Question 23Pension Plan Administration

A participant's spouse is entitled to a qualified joint and survivor annuity (QJSA) under a defined benefit plan. Which statement best describes the spousal consent requirement?

  1. Spousal consent is required only if the plan is terminated
  2. The participant may waive the QJSA without spousal consent if the participant is the primary beneficiary
  3. Spousal consent may be given orally to the plan administrator
  4. A waiver of the QJSA by the participant requires the spouse's written consent, which must be witnessed by a notary or plan representative Correct answer.

Explanation

ERISA and the Code require spousal consent to waive the QJSA, and the consent must be in writing and witnessed by a notary public or plan representative. Oral consent is insufficient.

Question 24Pension Plan Administration

Under ERISA's claims procedure rules, if a plan denies a disability benefit claim, the claimant generally must be given how long to appeal the denial?

  1. At least 180 days Correct answer.
  2. At least 30 days
  3. At least 90 days
  4. At least 60 days

Explanation

ERISA claims procedures require plans to allow claimants at least 180 days to appeal an adverse benefit determination. This period ensures a meaningful opportunity to seek review.

Question 25Pension Plan Administration

A plan sponsor is considering a plan merger. Which requirement generally applies to protect participants' accrued benefits?

  1. The merger must be approved by the Department of Labor before it occurs
  2. The merger must result in a reduction of benefits to offset administrative costs
  3. Each participant must receive a benefit immediately after the merger that is at least equal to the benefit immediately before the merger Correct answer.
  4. All participants must be fully vested upon the merger

Explanation

A plan merger must ensure that each participant's benefit immediately after the merger is at least equal to the benefit immediately before the merger. This preserves accrued benefits.

Question 26Pension Plan Administration

Which document must a plan administrator automatically furnish to participants within 210 days after the end of the plan year?

  1. Schedule SB
  2. Annual funding notice
  3. Summary annual report Correct answer.
  4. Summary plan description

Explanation

ERISA requires the plan administrator to furnish a summary annual report (SAR) to participants within 210 days after the end of the plan year. The SAR summarizes the plan's financial information from the annual return.

Question 27Pension Plan Administration

What is the maximum period a plan may require an employee to wait before becoming eligible to participate in a 401(k) plan?

  1. Six months of service
  2. Two years of service
  3. Three years of service
  4. One year of service Correct answer.

Explanation

Under Code Section 410(a), a qualified plan may impose a maximum age and service condition of age 21 and one year of service. For 401(k) plans, the maximum waiting period is generally one year of service.

Question 28Pension Plan Administration

Under the vesting rules for employer matching contributions in a 401(k) plan, which vesting schedule is permitted?

  1. Two-year cliff
  2. Five-year cliff
  3. Three-year cliff Correct answer.
  4. Six-year graded

Explanation

Matching contributions are subject to either a three-year cliff vesting schedule or a six-year graded schedule (2-6 years). A three-year cliff is the fastest permitted cliff schedule for matching contributions.

Question 29Pension Plan Administration

Which of the following statements about the timing of participant-directed investment elections is correct?

  1. Participants must be given the opportunity to direct investments at least annually.
  2. Participants must be given the opportunity to direct investments at least semi-annually.
  3. Participants must be given the opportunity to direct investments at least monthly.
  4. Participants must be given the opportunity to direct investments at least quarterly. Correct answer.

Explanation

Under ERISA Section 404(c), participants must be given the opportunity to give investment instructions at least as frequently as quarterly. More frequent opportunities may be provided but are not required.

Question 30Pension Plan Administration

What is the maximum duration of a participant loan from a qualified plan without it being treated as a taxable distribution?

  1. Three years, unless the loan is for education expenses
  2. Ten years, regardless of the purpose
  3. Seven years, unless the loan is for medical expenses
  4. Five years, unless the loan is for the purchase of a primary residence Correct answer.

Explanation

Under Code Section 72(p), a plan loan must generally be repaid within five years to avoid being treated as a distribution. An exception allows a longer repayment period if the loan is used to acquire a principal residence.

Question 31Pension Plan Administration

Which of the following is a key difference between a defined benefit plan and a defined contribution plan regarding investment risk?

  1. In a defined benefit plan, the employer bears the investment risk; in a defined contribution plan, the participant bears the risk. Correct answer.
  2. Both plans place investment risk on the participant.
  3. In a defined benefit plan, the participant bears the investment risk; in a defined contribution plan, the employer bears the risk.
  4. Both plans place investment risk on the employer.

Explanation

A defined benefit plan promises a specific benefit at retirement, so the employer bears the investment risk. In a defined contribution plan, the benefit is based on account balances, so the participant bears the investment risk.

Question 32Pension Plan Administration

Under ERISA, what is the maximum bond amount required for a plan official who handles plan funds?

  1. 10% of the amount of funds handled, with no cap
  2. 10% of the amount of funds handled, up to $500,000 Correct answer.
  3. 10% of the amount of funds handled, up to $1,000,000
  4. 5% of the amount of funds handled, up to $500,000

Explanation

ERISA Section 412 requires a bond of at least 10% of the amount of funds handled, with a minimum of $1,000 and a maximum of $500,000 (or $1,000,000 if the plan holds employer securities).

Question 33Pension Plan Administration

Which of the following best describes the purpose of the summary plan description (SPD)?

  1. To provide a detailed technical analysis of the plan's tax qualification
  2. To disclose the plan's investment performance
  3. To summarize the plan's annual financial report
  4. To inform participants of their rights and benefits under the plan in plain language Correct answer.

Explanation

The SPD is a plain-language summary of the plan's terms, benefits, and participant rights, required by ERISA. It must be furnished to participants and beneficiaries.

Question 34Pension Plan Administration

A participant who is reemployed after a break in service may be required to repay a prior distribution to restore forfeited benefits. Which rule generally governs the repayment period?

  1. The repayment must be made within five years of the break in service. Correct answer.
  2. The repayment must be made within the same plan year as reemployment.
  3. The repayment must be made within three years of reemployment.
  4. The repayment must be made within one year of reemployment.

Explanation

Under the break-in-service rules, a participant who receives a distribution and later returns to service generally must repay the distribution within five years of the break in service to restore forfeited benefits.

Question 35Pension Plan Administration

Which of the following statements about the top-heavy rules for a 401(k) plan is correct?

  1. A plan is top-heavy if more than 30% of account balances are attributable to key employees.
  2. A plan is top-heavy if more than 40% of account balances are attributable to key employees.
  3. A plan is top-heavy if more than 60% of account balances are attributable to key employees. Correct answer.
  4. A plan is top-heavy if more than 50% of account balances are attributable to key employees.

Explanation

A plan is considered top-heavy if the total account balances of key employees exceed 60% of the total account balances of all employees. This triggers minimum contribution requirements.

Question 36Pension Plan Administration

Under the ADP test, what is the maximum permitted actual deferral percentage (ADP) for a highly compensated employee (HCE) if the non-HCE ADP is 4%?

  1. 5%
  2. 4%
  3. 7%
  4. 6% Correct answer.

Explanation

The ADP test limits the HCE ADP to 125% of the non-HCE ADP, or the lesser of 200% of the non-HCE ADP or the non-HCE ADP plus 2 percentage points. With a non-HCE ADP of 4%, the HCE ADP may not exceed 6% (4% + 2%).

Question 37Pension Plan Administration

Which of the following is a permissible method for correcting an excess contribution to a 401(k) plan under the Employee Plans Compliance Resolution System (EPCRS)?

  1. Transfer the excess contribution to a nonqualified plan
  2. Refund the excess contribution plus earnings to the participant and notify the plan administrator Correct answer.
  3. Forfeit the excess contribution to the plan
  4. Leave the excess contribution in the plan and pay a penalty to the IRS

Explanation

Under EPCRS, excess contributions can be corrected by distributing the excess amount, adjusted for earnings, to the participant. The correction must be made within the prescribed correction period.

Question 38Pension Plan Administration

Which of the following statements about the summary of material modifications (SMM) is correct?

  1. An SMM must be furnished to participants within 120 days after the material modification is adopted.
  2. An SMM must be furnished to participants within 60 days after the material modification is adopted.
  3. An SMM must be furnished to participants within 30 days after the material modification is adopted.
  4. An SMM must be furnished to participants within 210 days after the end of the plan year in which the material modification is adopted. Correct answer.

Explanation

A summary of material modifications must be furnished to participants within 210 days after the end of the plan year in which the material modification is adopted. It describes changes to the plan.

Question 39Pension Plan Administration

What is the maximum annual compensation limit for 2024 that may be taken into account for contributions to a qualified plan?

  1. $345,000 Correct answer.
  2. $305,000
  3. $290,000
  4. $330,000

Explanation

For 2024, the annual compensation limit under Code Section 401(a)(17) is $345,000. This limit applies to contributions and benefits under qualified plans.

Question 40Pension Plan Administration

Which of the following is a requirement for a plan to be considered an eligible automatic contribution arrangement (EACA)?

  1. The default contribution rate must be at least 3% but not more than 10% of compensation. Correct answer.
  2. The default contribution rate must be at least 1% of compensation.
  3. The default contribution rate must be at least 6% of compensation.
  4. The default contribution rate must be at least 5% of compensation.

Explanation

An EACA must have a default contribution rate of at least 3% and not more than 10% of compensation. This range applies during the initial period and thereafter.

Question 41Pension Plan Administration

In a defined benefit plan, which of the following best describes the purpose of the accrued benefit?

  1. The benefit that would be payable if the participant terminated today, ignoring future service
  2. The benefit payable at normal retirement age based on current service and compensation
  3. The benefit guaranteed by the Pension Benefit Guaranty Corporation
  4. The benefit that has vested under the plan's vesting schedule Correct answer.

Explanation

The accrued benefit is the benefit that has accumulated to date under the plan's formula, often expressed as a monthly benefit at normal retirement age. It is not necessarily the vested benefit, which depends on the vesting schedule.

Question 42Pension Plan Administration

Under the rules for qualified joint and survivor annuities (QJSA), what is the minimum survivor benefit for a participant who elects a QJSA with a spouse?

  1. 50% of the participant's benefit Correct answer.
  2. 25% of the participant's benefit
  3. 75% of the participant's benefit
  4. 100% of the participant's benefit

Explanation

A QJSA must provide a survivor annuity that is at least 50% of the annuity payable to the participant during their lifetime. The participant may elect a higher percentage if the plan permits.

Question 43Pension Plan Administration

Which of the following statements about the minimum funding requirement for a defined benefit plan is correct?

  1. The minimum required contribution must be paid by the 15th day of the third month after the plan year end.
  2. The minimum required contribution must be paid by the due date of the plan's tax return, including extensions. Correct answer.
  3. The minimum required contribution must be paid by the 15th day of the fourth month after the plan year end.
  4. The minimum required contribution must be paid by the last day of the plan year.

Explanation

Under Code Section 430, the minimum required contribution for a defined benefit plan must be paid by the due date of the plan's tax return, including extensions. This is generally 8½ months after the plan year end.

Question 44Pension Plan Administration

A plan administrator is reviewing a domestic relations order to determine if it is a QDRO. Which of the following is required for the order to be a QDRO?

  1. The order must specify the name and last known mailing address of the participant and each alternate payee. Correct answer.
  2. The order must be notarized by a plan fiduciary.
  3. The order must be filed with the Department of Labor.
  4. The order must be approved by the plan administrator before it is submitted to the court.

Explanation

A QDRO must include specific information, including the name and last known mailing address of the participant and each alternate payee, and the amount or percentage of the benefit to be paid to each alternate payee.

Question 45Pension Plan Administration

Which of the following is a permitted method for a 401(k) plan to correct a failed ADP test?

  1. Transfer the excess contributions to a suspense account
  2. Make qualified nonelective contributions (QNECs) on behalf of non-highly compensated employees Correct answer.
  3. Forfeit the excess contributions from the highly compensated employees
  4. Reduce the highly compensated employees' account balances by the excess amount

Explanation

A plan may correct a failed ADP test by making QNECs or qualified matching contributions (QMACs) to non-HCEs, or by distributing excess contributions to HCEs. QNECs are a permitted corrective method.

Question 46Pension Plan Administration

Under ERISA, what is the maximum period for a plan fiduciary to provide documents requested by a participant?

  1. 60 days after the request
  2. 30 days after the request Correct answer.
  3. 120 days after the request
  4. 90 days after the request

Explanation

ERISA Section 104(b)(4) requires the plan administrator to furnish requested documents within 30 days after the request. Failure can result in penalties.

Question 47Pension Plan Administration

Which of the following statements about the deduction limit for contributions to a defined contribution plan is correct?

  1. The deduction limit is generally 15% of covered payroll.
  2. The deduction limit is generally 25% of covered payroll. Correct answer.
  3. The deduction limit is generally 50% of covered payroll.
  4. The deduction limit is generally 10% of covered payroll.

Explanation

Under Code Section 404(a)(3), the deduction limit for contributions to a defined contribution plan is generally 25% of the total compensation of covered employees. Certain contributions, such as employee deferrals, are not counted against this limit.

Question 48Pension Plan Administration

A plan sponsor is considering a plan merger. Which of the following requirements generally applies to protect participants' accrued benefits?

  1. Each participant must receive a benefit immediately after the merger that is at least equal to the benefit they would have received before the merger. Correct answer.
  2. The merger must be completed within one year of the effective date.
  3. The merger must result in a plan that is top-heavy.
  4. The merger must be approved by the PBGC.

Explanation

Under Code Section 414(l), a plan merger must ensure that each participant's accrued benefit after the merger is at least equal to the benefit they would have been entitled to before the merger. This protects participants from losing benefits.

Question 49Pension Plan Administration

In a defined benefit plan, which of the following best describes the actuarial assumption known as the interest rate assumption?

  1. The rate of return expected on plan assets used to discount future benefits Correct answer.
  2. The rate of employee turnover used to estimate future service
  3. The rate of inflation used to project future compensation increases
  4. The rate of mortality used to estimate life expectancy

Explanation

The interest rate assumption (or discount rate) is the rate used to discount future benefit payments to their present value. It reflects the expected long-term return on plan assets.

Question 50Pension Plan Administration

A plan fiduciary is evaluating an investment in a collective investment trust (CIT). Which of the following statements best reflects the fiduciary's responsibilities?

  1. The fiduciary must ensure the CIT is a permissible investment under the plan document and evaluate its fees and performance. Correct answer.
  2. The fiduciary may rely solely on the CIT's past performance without further review.
  3. The fiduciary is relieved of all liability if the CIT is managed by a bank.
  4. The fiduciary must invest exclusively in CITs to satisfy diversification requirements.

Explanation

A fiduciary must act prudently and in the best interest of participants, which includes ensuring the investment is permitted by the plan and evaluating its costs and performance. Relying solely on past performance or the manager's status is not sufficient.