Certified Plan Sponsor Professional (CPSP) Practice Exam

What does the DOL consider a late deposit of salary deferral contributions?

1. Compliance issue with tax regulations

2. A violation of pension plan regulations

3. A prohibited transaction under ERISA

4. Not an issue if corrected promptly

The correct answer is: A prohibited transaction under ERISA

The Department of Labor (DOL) considers a late deposit of salary deferral contributions to be a prohibited transaction under the Employee Retirement Income Security Act (ERISA). This categorization signifies that the late deposit not only raises compliance concerns but also specifically violates the fiduciary provisions of ERISA, which require timely and proper handling of employee contributions to retirement plans. Under ERISA, plan fiduciaries have a responsibility to act in the best interests of plan participants. Late contributions can harm participants' retirement savings, thus violating the fiduciary duty owed to them. The consequences of late deposits can include penalties, the need to make up for lost earnings, and potential legal implications for the plan sponsor if not addressed correctly. While the other options touch on various regulatory aspects—such as compliance with tax regulations or pension plan regulations—they do not specifically capture the framework of how ERISA classifies these late deposits. Recognizing the late deposit as a prohibited transaction under ERISA aligns with the DOL's commitment to safeguarding participants' interests in retirement plans.