Certified Plan Sponsor Professional (CPSP) Practice Exam

When must salary deferral contributions be deposited into the plan's trust for companies with fewer than 100 employees?

1. By the end of the month

2. 9 days after payroll

3. 7 days after withholding from paychecks

4. Immediately after payroll processing

The correct answer is: 7 days after withholding from paychecks

For companies with fewer than 100 employees, the requirement is that salary deferral contributions, such as those made to 401(k) plans, must be deposited into the plan's trust within a timely manner to ensure compliance with federal regulations. Specifically, the correct timeframe is that these contributions need to be deposited no later than 7 days after the withholding occurs from employees' paychecks. This rule is established to safeguard employees’ deferred earnings and to ensure that their contributions are credited to their retirement accounts as soon as practically possible. This 7-day rule reflects a balance between the administrative capabilities of smaller companies and the need for prompt deposit to protect employees' retirement savings. By adhering to this requirement, companies can avoid potential problems with plan compliance and ensure that employees’ contributions are developed effectively in their plan. The other timeframes presented do not align with the required standards for small employers and thus would not meet regulatory compliance for the timely deposit of salary deferral contributions.