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 is indicated by a 401(k) participant making annual pre-tax deferrals of $22,000?

The participant is likely under age 50.
The participant is making catch-up contributions due to being age 50 or older.
The participant is actively withdrawing funds.
The participant is claiming deductions on their tax return.

The correct answer is: The participant is making catch-up contributions due to being age 50 or older.

The choice indicating that the participant is making catch-up contributions due to being age 50 or older is correct because individuals aged 50 and older are permitted to make additional contributions to their 401(k) plans beyond the standard contribution limit. In 2023, the standard pre-tax deferral limit for a 401(k) participant is $22,500. However, for participants aged 50 and over, there is an additional catch-up contribution limit of $7,500, allowing them to contribute more than the standard limit. Thus, if a participant is contributing $22,000, it suggests they are utilizing some form of catch-up contribution, indicating they are likely at least 50 years old, given the ability to contribute above the base limit. This aligns with IRS regulations designed to help older workers save more for retirement as they approach their retirement years. Other options do not capture the specifics of the 401(k) program's contribution limits and age-related provisions.