Certified Plan Sponsor Professional (CPSP) Practice Exam

What documentation is essential for a qualified retirement plan?

1. A detailed employee handbook

2. A written plan document

3. A series of emails to participants

4. A list of previous beneficiaries

The correct answer is: A written plan document

A written plan document is essential for a qualified retirement plan because it serves as the formal blueprint that outlines the plan’s terms and conditions. This document is crucial for several reasons: 1. **Legal Requirement**: The Employee Retirement Income Security Act (ERISA) mandates that all qualified plans have a written plan document. This requirement ensures that all participants have access to the essential rules governing the plan and their entitlements. 2. **Clarity and Compliance**: The written document clarifies the rights and obligations of both the employer and the participants. It helps ensure that the plan complies with federal regulations, and it is key in determining benefits and eligibility. 3. **Participant Understanding**: A well-documented plan provides participants with the necessary information to understand their benefits, how contributions are made, and the process for distributions. This transparency is vital for effective participant engagement and planning for retirement. In comparison, the other options, while potentially valuable in their contexts, do not fulfill the legal requirements or provide the comprehensive framework that a written plan document does. For example, an employee handbook and a list of beneficiaries may be informative but do not cover the substantive legal and procedural elements that must be documented in accordance with regulatory standards. Similarly, a series of emails lacks