Certified Plan Sponsor Professional (CPSP) Practice Exam

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

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

2. At the beginning of the plan year

3. Within one week of the enrollment period

4. Before any employee can participate in the plan

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

The correct timing for providing an ADP (Actual Deferral Percentage) test safe harbor notice is at least 30 days and no more than 90 days before each plan year begins. This requirement ensures that eligible employees receive adequate notice regarding the plan's features and their opportunities to participate well in advance of the new plan year. This notice detail is crucial because it informs employees about the plan provisions that fulfill safe harbor requirements, ultimately guiding their enrollment decisions and contributions accordingly. Providing this information within the specified timeframe allows employees to make informed choices about their participation and contribution levels in the retirement plan, which is necessary for compliance with federal regulations. Other options do not align with the regulatory requirements. Giving the notice at the beginning of the plan year does not provide employees the necessary time to consider their options. If it is provided only within one week of the enrollment period, it may not be sufficient time for employees to make informed decisions, and notifying employees before any participation could be impractical as it does not correlate with a specific timeframe related to the annual cycle of the plan.