Certified Plan Sponsor Professional (CPSP) Practice Exam

Which factor can disqualify employees from participating in a 401(k) plan?

1. Full-time status

2. Job responsibilities

3. Minimum hourly wage

4. Tenure less than one year

The correct answer is: Tenure less than one year

The factor that can disqualify employees from participating in a 401(k) plan is tenure less than one year. Many employers set specific eligibility requirements that include a minimum period of service before employees can participate in the 401(k) plan. It's common for companies to require employees to complete a full year of service to ensure that they are committed to the organization and to prevent frequent and potentially disruptive turnover in the retirement plan. Full-time status typically qualifies employees for participation and is often a requirement for 401(k) plans rather than a disqualifying factor. Job responsibilities do not necessarily determine eligibility, as participation is based more on employment status than specific duties. The minimum hourly wage is not a standard disqualifier for 401(k) participation; instead, eligibility generally focuses on employment type and service duration. Therefore, tenure less than one year is a valid criterion that employers may use to limit participation in a 401(k) plan.