Certified Plan Sponsor Professional (CPSP) Practice Exam

Which of the following is an appropriate class exclusion from participation in the 401(k) plan?

1. All employees who work on the loading dock

2. Employees over the age of 50

3. Managers and executives

4. Part-time employees

The correct answer is: All employees who work on the loading dock

An appropriate class exclusion from participation in a 401(k) plan can indeed involve specific job functions or roles within a company. Excluding all employees who work on the loading dock represents a legitimate business decision that may reflect the company’s operational structure or objectives. In the context of 401(k) plans, certain classifications can be excluded if they do not meet the criteria set forth under the plan document and applicable regulations. For instance, limiting participation to certain employee classes based on job functions is permissible as long as it aligns with nondiscrimination rules and is not discriminatory against protected groups. The options that involve age, management status, or part-time employment raise concerns related to the nondiscrimination requirements of ERISA and the IRS. For example, excluding employees over the age of 50 could be seen as age discrimination, while excluding managers and executives may not be suitable because it could potentially violate rules on unequal benefits, particularly if other groups are allowed to participate. Similarly, excluding part-time employees may not be consistent with fair treatment unless explicitly stated in plan guidelines. In summary, the exclusion of all employees working on the loading dock is a clear class-based exclusion that can be justified under certain business classifications, making it an appropriate choice in this scenario.