Certified Plan Sponsor Professional (CPSP) Practice Exam

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When must an ADP test safe harbor notice be provided to eligible employees?

  1. At least 30 days and no more than 90 days before each plan year

  2. Immediately at the beginning of the plan year

  3. Only upon employee request

  4. At least 10 days before the plan year

The correct answer is: At least 30 days and no more than 90 days before each plan year

The correct answer indicates that an ADP (Actual Deferral Percentage) test safe harbor notice must be provided to eligible employees at least 30 days and no more than 90 days before each plan year. This requirement is established to ensure that employees are adequately informed about their rights and the terms of the safe harbor contribution options before the plan year begins. Providing the notice within this timeframe allows employees to make informed decisions about their contributions to the 401(k) plan based on the safe harbor provisions. By receiving this announcement in advance, employees have the opportunity to assess their financial planning and retirement savings strategies, enabling them to choose participation at the beginning of the plan year with a clear understanding of the implications. This proactive communication is essential in fostering transparency and compliance within retirement plans, ensuring that employees receive consistent and timely information. The timing of the notice helps to avoid confusion and potential compliance issues, facilitating better employee engagement in the retirement savings process.