Certified Plan Sponsor Professional (CPSP) Practice Exam

Which of the following is a requirement for notifying employees of a qualified default investment?

1. Notice must be sent via regular mail only

2. Only employees who opt-in need to be notified

3. Notification required at least 30 days prior to eligibility

4. Notification required at least 60 days after the plan year

The correct answer is: Notification required at least 30 days prior to eligibility

The requirement stating that notification must be provided at least 30 days prior to eligibility is aligned with the regulations surrounding qualified default investment alternatives (QDIAs). This rule ensures that employees are informed well in advance regarding their investment options, particularly when they are automatically enrolled in a retirement plan. The goal is to give employees sufficient time to understand their options and make informed decisions about their retirement savings. By providing this notice a month in advance, the plan sponsors allow employees the opportunity to evaluate their investment choices and consider any personal preferences or investment strategies they might wish to pursue before any default investments are enacted. This requirement supports transparency and enhances employee engagement in their retirement planning. The other options do not meet the established guidelines for notifications regarding QDIAs, as they either limit the method of communication, the scope of notification to only some employees, or suggest an incorrect timeline for when notifications should occur.