Certified Plan Sponsor Professional (CPSP) Practice Exam

What is the maximum age requirement for participation in a 401(k) plan?

1. Age 18

2. Age 21

3. Age 25

4. Age 30

The correct answer is: Age 21

The correct answer is that the maximum age requirement for participation in a 401(k) plan is 21. Under the Internal Revenue Code, employers can establish a 401(k) plan with a minimum participation age of 21. This means that employees must be at least 21 years old to be eligible to defer compensation to the plan and receive employer contributions. However, it's worth noting that employers may have the option to allow participation for employees younger than 21, but they are not required to do so. The choice to implement a different age requirement is completely at the discretion of the employer. Options indicating higher ages, such as 25 or 30, exceed the federal guidelines and therefore do not represent the legal requirements set by the Internal Revenue Code, which establishes 21 as the maximum age for participation eligibility. Age 18 is a lower threshold than what is generally accepted for these plans, as the law allows for setting the minimum at 21 years old.