Certified Plan Sponsor Professional (CPSP) Practice Exam

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How often must a complete rewriting of a 401(k) plan be conducted for prototype plans?

Every 3 years
Every 5 years
Every 6 years
Every 10 years

The correct answer is: Every 6 years

A complete rewriting of a 401(k) plan for prototype plans must be conducted every six years. This requirement originates from the need to ensure that the plan documents remain compliant with evolving tax laws and regulatory changes. Over time, significant amendments can occur due to changes in legislation, IRS guidance, or new Department of Labor regulations, thus necessitating a thorough review and potential rewriting of the plan. It is crucial for plan sponsors to stay updated with these regulatory requirements to maintain compliance and ensure that participants receive the benefits intended by the plan provisions. Regular rewrites also help in eliminating ambiguities in the plan language and enhance the overall clarity and effectiveness of the plan documentation. Adhering to the six-year timeline helps avoid potential penalties that could arise from outdated plan documents.