Ultimate PPC Professional Plan Consultant Exam
Prep: 200 Comprehensive MCQ Practice Guide &
ERISA Fiduciary Review
Overview
The PPC designation is awarded to financial professionals who
demonstrate a high level of expertise in managing 401(k) and
other defined contribution plans. It centers on a "Fiduciary
Standard of Care," ensuring that consultants can help plan
sponsors (employers) minimize liability and improve outcomes for
plan participants.
Key Features
ERISA Knowledge: Deep dive into the Employee Retirement
Income Security Act of 1974.
Fiduciary Framework: Implementing the "Global Fiduciary
Standard of Excellence."
Service Provider Benchmarking: Evaluating fees, services, and
investment performance.
Plan Design: Customizing vesting schedules, safe harbor
provisions, and auto-enrollment to meet employer goals.
What is the primary federal law governing private-sector
retirement plans in the United States?
A. FINRA Rule 2111
B. The Securities Act of 1933
C. ERISA (Employee Retirement Income Security Act)
, D. The Glass-Steagall Act
Correct Answer: C
Explanation: ERISA was enacted in 1974 to protect the retirement
assets of Americans by establishing rules that plan fiduciaries
must follow.
Under ERISA, a fiduciary must act solely in the interest of:
A. The Plan Sponsor (The Employer)
B. The Shareholders of the company
C. The Plan Participants and Beneficiaries
D. The Service Provider (Recordkeeper)
Correct Answer: C
Explanation: This is known as the "Duty of Loyalty." Fiduciaries
must prioritize the participants' interests above all else, including
their own or the company's.
Which section of ERISA provides a "safe harbor" to
fiduciaries who allow participants to exercise control over
their own investments?
A. Section 401(k)
B. Section 404(c)
C. Section 403(b)
D. Section 457
Correct Answer: B
Explanation: ERISA 404(c) limits the liability of plan fiduciaries for
losses resulting from a participant's exercise of investment
control, provided certain disclosure and investment option
requirements are met.
What does the "Prudent Expert" rule require of a plan
fiduciary?
A. To achieve the highest possible return on every investment.
, B. To act with the care, skill, and diligence that a person familiar
with such matters would use.
C. To guarantee that no participant ever loses money.
D. To follow the instructions of the CEO regardless of the plan
document.
Correct Answer: B
Explanation: Fiduciaries are held to a higher standard than the
"average" person; they must act as an expert in the field of
retirement plan management would.
A "Safe Harbor" 401(k) plan is primarily designed to:
A. Lower the cost of the plan for the employer.
B. Automatically pass non-discrimination testing (ADP/ACP).
C. Prevent employees from withdrawing money before age 59.5.
D. Eliminate the need for a recordkeeper.
Correct Answer: B
Explanation: By committing to specific employer contributions
(matching or non-elective), the plan is deemed to pass the
complex annual non-discrimination tests.
Which of the following is considered a "Prohibited
Transaction" under ERISA?
A. Hiring a qualified investment manager.
B. Paying a reasonable fee for plan administration.
C. Lending plan assets to the plan sponsor (employer).
D. Educating participants on diversification.
Correct Answer: C
Explanation: ERISA prohibits "Parties in Interest" (like the
employer) from self-dealing or using plan assets for their own
benefit, such as taking a loan from the retirement fund.
, What is the purpose of an Investment Policy Statement
(IPS)?
A. To serve as a marketing brochure for the plan.
B. To provide a written framework for selecting, monitoring, and
replacing plan investments.
C. To satisfy the IRS that all employees are participating.
D. To replace the Summary Plan Description (SPD).
Correct Answer: B
Explanation: While not strictly required by ERISA, the DOL
considers an IPS a critical component of a prudent fiduciary
process.
In a 401(k) plan, "Vesting" refers to:
A. The type of clothes the consultant wears.
B. The percentage of employer-contributed funds an employee
"owns."
C. The process of enrolling a new employee.
D. The total return of the mutual funds.
Correct Answer: B
Explanation: Vesting schedules determine when an employee has
a non-forfeitable right to employer contributions (e.g., matching).
Which document must be provided to participants to explain
the plan’s features in plain language?
A. Form 5500
B. Adoption Agreement
C. Summary Plan Description (SPD)
D. Fidelity Bond
Correct Answer: C
Explanation: The SPD is the primary vehicle for informing
Prep: 200 Comprehensive MCQ Practice Guide &
ERISA Fiduciary Review
Overview
The PPC designation is awarded to financial professionals who
demonstrate a high level of expertise in managing 401(k) and
other defined contribution plans. It centers on a "Fiduciary
Standard of Care," ensuring that consultants can help plan
sponsors (employers) minimize liability and improve outcomes for
plan participants.
Key Features
ERISA Knowledge: Deep dive into the Employee Retirement
Income Security Act of 1974.
Fiduciary Framework: Implementing the "Global Fiduciary
Standard of Excellence."
Service Provider Benchmarking: Evaluating fees, services, and
investment performance.
Plan Design: Customizing vesting schedules, safe harbor
provisions, and auto-enrollment to meet employer goals.
What is the primary federal law governing private-sector
retirement plans in the United States?
A. FINRA Rule 2111
B. The Securities Act of 1933
C. ERISA (Employee Retirement Income Security Act)
, D. The Glass-Steagall Act
Correct Answer: C
Explanation: ERISA was enacted in 1974 to protect the retirement
assets of Americans by establishing rules that plan fiduciaries
must follow.
Under ERISA, a fiduciary must act solely in the interest of:
A. The Plan Sponsor (The Employer)
B. The Shareholders of the company
C. The Plan Participants and Beneficiaries
D. The Service Provider (Recordkeeper)
Correct Answer: C
Explanation: This is known as the "Duty of Loyalty." Fiduciaries
must prioritize the participants' interests above all else, including
their own or the company's.
Which section of ERISA provides a "safe harbor" to
fiduciaries who allow participants to exercise control over
their own investments?
A. Section 401(k)
B. Section 404(c)
C. Section 403(b)
D. Section 457
Correct Answer: B
Explanation: ERISA 404(c) limits the liability of plan fiduciaries for
losses resulting from a participant's exercise of investment
control, provided certain disclosure and investment option
requirements are met.
What does the "Prudent Expert" rule require of a plan
fiduciary?
A. To achieve the highest possible return on every investment.
, B. To act with the care, skill, and diligence that a person familiar
with such matters would use.
C. To guarantee that no participant ever loses money.
D. To follow the instructions of the CEO regardless of the plan
document.
Correct Answer: B
Explanation: Fiduciaries are held to a higher standard than the
"average" person; they must act as an expert in the field of
retirement plan management would.
A "Safe Harbor" 401(k) plan is primarily designed to:
A. Lower the cost of the plan for the employer.
B. Automatically pass non-discrimination testing (ADP/ACP).
C. Prevent employees from withdrawing money before age 59.5.
D. Eliminate the need for a recordkeeper.
Correct Answer: B
Explanation: By committing to specific employer contributions
(matching or non-elective), the plan is deemed to pass the
complex annual non-discrimination tests.
Which of the following is considered a "Prohibited
Transaction" under ERISA?
A. Hiring a qualified investment manager.
B. Paying a reasonable fee for plan administration.
C. Lending plan assets to the plan sponsor (employer).
D. Educating participants on diversification.
Correct Answer: C
Explanation: ERISA prohibits "Parties in Interest" (like the
employer) from self-dealing or using plan assets for their own
benefit, such as taking a loan from the retirement fund.
, What is the purpose of an Investment Policy Statement
(IPS)?
A. To serve as a marketing brochure for the plan.
B. To provide a written framework for selecting, monitoring, and
replacing plan investments.
C. To satisfy the IRS that all employees are participating.
D. To replace the Summary Plan Description (SPD).
Correct Answer: B
Explanation: While not strictly required by ERISA, the DOL
considers an IPS a critical component of a prudent fiduciary
process.
In a 401(k) plan, "Vesting" refers to:
A. The type of clothes the consultant wears.
B. The percentage of employer-contributed funds an employee
"owns."
C. The process of enrolling a new employee.
D. The total return of the mutual funds.
Correct Answer: B
Explanation: Vesting schedules determine when an employee has
a non-forfeitable right to employer contributions (e.g., matching).
Which document must be provided to participants to explain
the plan’s features in plain language?
A. Form 5500
B. Adoption Agreement
C. Summary Plan Description (SPD)
D. Fidelity Bond
Correct Answer: C
Explanation: The SPD is the primary vehicle for informing
