Certified Plan Sponsor Professional (CPSP) Practice Exam

Plans that adopt a Qualified Automatic Contribution Arrangement (QACA) must provide participants notice of what?

1. The investment performance for the last year

2. The deferral percentage, the right to change the percentage or opt out, and information concerning the default investment

3. The tax consequences of contributions

4. The name of the plan sponsor

The correct answer is: The deferral percentage, the right to change the percentage or opt out, and information concerning the default investment

Plans that adopt a Qualified Automatic Contribution Arrangement (QACA) are required to provide participants with specific notices that are crucial for informed decision-making regarding their retirement savings. The correct choice highlights the essential elements that must be communicated to participants: the deferral percentage being applied to their contributions, the participants' rights to change this percentage or opt out altogether, and details surrounding the default investment option into which contributions will be directed unless individuals make an alternative choice. This information is vital because it ensures that participants are aware of their rights and the mechanics of the automatic enrollment feature, which is a key aspect of QACA. It empowers them to take an active role in their retirement planning rather than passively accepting the default provisions. Clear communication about these elements facilitates better understanding and encourages participants to engage with their retirement savings strategy. Understanding these required notices is essential for compliance with regulatory guidelines and ensuring that participants are adequately informed about how their contributions will be managed.