Certified Plan Sponsor Professional (CPSP) Practice Exam

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Prepare for the Certified Plan Sponsor Professional Exam. Use flashcards and multiple choice questions with full explanations. Achieve exam success!

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What can the non-vested portion of a participant's benefit that is forfeited be used for?

To redistribute among all active participants
To reduce employer contributions for that year
To increase employer matching contributions
To create a surplus fund

The correct answer is: To reduce employer contributions for that year

The non-vested portion of a participant's benefit that is forfeited can indeed be used to reduce employer contributions for that year. When a participant leaves a retirement plan before they are fully vested, the non-vested benefit amount is forfeited and can be utilized by the plan sponsor for the benefit of the plan. By applying these forfeited amounts to offset required employer contributions, the plan sponsor effectively reduces the financial impact of contributions for that specific year. This is a common practice and serves as a way for employers to manage their retirement plan costs effectively. Other options might suggest redistributing funds or using them in ways that do not consistently align with standard practices or regulations governing retirement plans. For instance, using forfeited amounts to increase employer matching contributions may not adhere to the defined structures of plan management and contribution strategies.