Certified Plan Sponsor Professional (CPSP) Practice Exam

Is employer contribution required under an Eligible Automatic Contribution Arrangement (EACA)?

1. Yes, for all employee contributions

2. No, it is not required for EACA plans

3. Only if the employee contributes above the company match

4. Yes, minimum contributions are mandated

The correct answer is: No, it is not required for EACA plans

An Eligible Automatic Contribution Arrangement (EACA) is designed to allow employers to automatically enroll employees into a retirement savings plan and make automatic contributions on their behalf. However, one of the defining characteristics of an EACA is that while employees are automatically enrolled and contributions are automatically deducted from their paychecks, the employer is not actually required to make contributions to the plan. This flexibility is crucial for employers because it allows them to implement automatic contributions to encourage employee participation without being burdened by mandatory employer contributions. Therefore, under an EACA, employer contributions are optional, reinforcing that employers can create an effective savings program for employees while managing their financial obligations effectively. This characteristic separates EACAs from other types of plans where an employer might be obligated to match or contribute a certain amount. Thus, understanding that employer contributions are not mandated under an EACA aligns with why the selected answer is accurate.