Certified Plan Sponsor Professional (CPSP) Practice Exam

What best practice helps ensure timely amendments of your 401(k) plan document?

1. Hiring an external consultant

2. Storing amendments digitally

3. Maintaining regular contact with document vendors

4. Limiting reviews to every two years

The correct answer is: Maintaining regular contact with document vendors

Maintaining regular contact with document vendors is crucial for ensuring timely amendments of your 401(k) plan document because it fosters an ongoing relationship where updates, changes in regulations, and specific needs of the plan can be addressed proactively. Regular communication allows plan sponsors to stay informed about any legal or regulatory changes that may necessitate amendments to the plan document. Additionally, this practice helps in recognizing potential issues before they arise and facilitates the efficient processing of amendments when necessary. In contrast, while hiring an external consultant could provide expertise, it does not guarantee timely amendments unless there is a structured plan in place for ongoing communication and updates. Storing amendments digitally is beneficial for organization and accessibility, but it does not directly influence the amendment process itself. Limiting reviews to every two years can lead to delays in addressing changes that should be made more promptly, leaving the plan potentially non-compliant or outdated for longer periods. Regular contact with document vendors keeps the process fluid and responsive to new information and requirements.