Certified Plan Sponsor Professional (CPSP) Practice Exam

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What is the time frame to notify participants of an eligible automatic contribution arrangement?

Within 15 days before the beginning of each plan year
Within 30 days before the beginning of each plan year
Within 60 days before the beginning of each plan year
Within 90 days before the beginning of each plan year

The correct answer is: Within 60 days before the beginning of each plan year

The correct time frame to notify participants of an eligible automatic contribution arrangement is within 60 days before the beginning of each plan year. This notification requirement is established to ensure that participants are adequately informed about their rights and options regarding the automatic contributions that will be made to their retirement plan. This 60-day notification period allows participants to understand how the automatic contributions will affect their paychecks and gives them an opportunity to make informed decisions about their participation in the plan. It also encourages engagement by giving participants sufficient time to opt-out or adjust their contribution rates, should they choose to do so. Moreover, the 60-day notice aligns with regulatory requirements that emphasize the importance of clear communication between plan sponsors and participants to promote understanding and participation in retirement savings programs. By adhering to this guideline, plan sponsors maintain compliance while also supporting their participants in making strategic financial decisions regarding their retirement savings.