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CPFA EXAM NEWEST 2026 ACTUAL EXAM TEST
BANK| NAPA (CERTIFIED PLAN FIDUCIARY
ADVISOR) CERTIFICATION EXAM PREP WITH
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Fiduciary Roles and Responsibilities
Q1. Under ERISA, a fiduciary must act for the exclusive purpose of providing benefits to participants and their beneficiaries. This is known as the: A) Prudent man rule. B) Exclusive purpose rule. C) Diversification requirement. D) Prohibited transaction rule. Answer: B Rationale: The exclusive purpose rule is a core fiduciary duty requiring fiduciaries to act solely in the interest of plan participants and beneficiaries. Q2. A plan sponsor hires a third-party administrator (TPA) to perform annual compliance testing. Under ERISA, the TPA is considered a: A) Named fiduciary. B) Non-fiduciary service provider. C) 3(21) fiduciary. D) Plan administrator. Answer: B Rationale: A TPA performing ministerial functions like compliance testing is
considered a non-fiduciary service provider. Fiduciary status requires discretionary authority or control over plan management or assets. Q3. Which of the following actions would most likely establish a fiduciary relationship under ERISA? A) Providing investment education materials to participants. B) Making a recommendation to a participant to transfer their account to a specific fund. C) Processing a participant's distribution request. D) Preparing the plan's Form 5500. Answer: B Rationale: Providing individualized investment advice for a fee that serves as the primary basis for investment decisions establishes fiduciary status under the DOL's five-part test. Q4. A 3(21) fiduciary advisor recommends investments to a plan committee, but the committee makes the final decisions. This advisor is considered a fiduciary because they: A) Have discretionary authority over plan assets. B) Are named in the plan document. C) Render investment advice for a fee that serves as a primary basis for decisions. D) Are responsible for all plan losses. Answer: C Rationale: A 3(21) fiduciary is an investment advice fiduciary. They act alongside other fiduciaries, recommending investments, but the final decision rests with the plan fiduciaries. Q5. Which of the following is NOT a core requirement for a fiduciary under ERISA? A) Acting with the care, skill, prudence, and diligence of a prudent person familiar with such matters. B) Diversifying plan investments to minimize the risk of large losses. C) Investing plan assets to maximize returns, even if it involves a higher level of
Answer: C Rationale: ERISA requires fiduciaries to manage the plan for the exclusive benefit of participants and their beneficiaries. Q9. Which of the following is NOT considered an exercise of fiduciary responsibility? A) Selecting an investment option for the plan. B) Monitoring a service provider. C) Processing a routine participant distribution. D) Hiring a plan advisor. Answer: C Rationale: Processing routine distributions is a ministerial function. Selecting, monitoring, and hiring service providers are fiduciary acts. Q10. A plan fiduciary delegates investment management to a 3(38) investment manager. The fiduciary: A) Is completely relieved of all liability. B) Still has a duty to prudently select and monitor the manager. C) No longer has any oversight responsibilities. D) Must approve every trade made by the manager. Answer: B Rationale: While the fiduciary may not be directly liable for the delegated duties, they are still responsible for overseeing the service providers to whom they delegated those duties. Q11. A plan sponsor hires an advisor to provide "education" to participants. The advisor provides general information about the benefits of diversification. This advisor is likely: A) A fiduciary. B) A non-fiduciary. C) A 3(38) fiduciary. D) A plan administrator.
Answer: B Rationale: A non-fiduciary advisor can provide education. Fiduciary status requires individualized advice that serves as the primary basis for investment decisions. Q12. Which of the following is true regarding a 3(16) fiduciary? A) They have investment discretion. B) They serve as the Plan Administrator and are responsible for administrative duties. C) They are never liable for plan errors. D) They are always a named fiduciary in the plan document. Answer: B Rationale: A 3(16) fiduciary serves as the Plan Administrator and is responsible for administrative duties, including compliance and notices. Q13. The DOL's 1975 regulation defines fiduciary investment advice using a five- part test. Which of the following is NOT one of the five parts? A) The advice is provided on a regular basis. B) The advice is provided pursuant to a mutual agreement. C) The advice serves as the primary basis for investment decisions. D) The advice is provided by a CPA. Answer: D Rationale: The five-part test includes providing advice on securities, on a regular basis, pursuant to mutual agreement, as the primary basis for decisions, and that is individualized. Being a CPA is not a criterion. Q14. Under the "prudent man" standard, a fiduciary is expected to act with: A) The care of an average person. B) The care, skill, prudence, and diligence of a prudent person familiar with such matters. C) The goal of maximizing profits at all costs. D) The guidance of the plan sponsor's business goals. Answer: B Rationale: ERISA requires fiduciaries to act with the care, skill, prudence, and
C) Only consider providers they have worked with before. D) Delegate the decision entirely to the plan's attorney. Answer: B Rationale: When selecting service providers, fiduciaries must objectively assess qualifications, service quality, and reasonableness of fees. Q19. Under ERISA, a fiduciary must follow: A) Only the advice of the plan's investment advisor. B) The plan's governing documents. C) The DOL's informal guidance only. D) The plan sponsor's business objectives. Answer: B Rationale: Fiduciaries must follow the plan's governing documents. Q20. Which of the following is a responsibility of the plan trustee? A) Filing Form 5500. B) Drafting the plan document. C) Safekeeping of plan assets. D) Providing investment education to participants. Answer: C Rationale: The trustee is responsible for the safekeeping of plan assets. Questions 21-40: Plan Governance and Documentation Q21. What is the primary purpose of a Retirement Plan Committee Charter? A) To guarantee a specific rate of return on plan investments. B) To outline the roles, responsibilities, and authority of the committee. C) To provide marketing material to attract new plan participants. D) To list the contact information of all service providers. Answer: B Rationale: A committee charter establishes proper governance by outlining the purpose, authority, and responsibilities of the retirement plan committee.
Q22. The Investment Policy Statement (IPS) should be reviewed at least: A) Monthly. B) Quarterly. C) Annually. D) Every five years. Answer: C Rationale: Best practices dictate that an IPS should be reviewed at least annually to ensure it remains appropriate for the plan's goals. Q23. Which of the following plan features is typically found in the plan's adoption agreement? A) Definition of ERISA fiduciary roles and responsibilities. B) The plan's Investment Policy Statement. C) The matching contribution formula. D) The committee meeting schedule. Answer: C Rationale: The adoption agreement contains plan-specific elections, such as the matching contribution formula, eligibility requirements, and other design features. Q24. The Summary Plan Description (SPD) must be provided to: A) Only the plan sponsor. B) Only the plan's fiduciaries. C) All participants and beneficiaries. D) The Department of Labor only. Answer: C Rationale: The SPD is a required disclosure document that must be provided to all participants and beneficiaries. Q25. Which of the following is a key component of an Investment Policy Statement (IPS)? A) The plan's investment return objectives. B) The names of all plan participants.
Answer: B Rationale: Plan administrators are responsible for the operation of the plan, which includes filing required forms and providing information to participants. Q29. A fiduciary file should contain all of the following EXCEPT: A) The Investment Policy Statement. B) Meeting minutes. C) Employee performance reviews. D) Service provider agreements. Answer: C Rationale: A fiduciary file documents the prudent process, including the IPS, meeting minutes, and service provider agreements. Employee performance reviews are not relevant to fiduciary oversight. Q30. The primary purpose of documenting fiduciary decisions is to: A) Impress the DOL during an audit. B) Demonstrate that a prudent process was followed. C) Satisfy the plan's attorney. D) Track participant complaints. Answer: B Rationale: Documentation is critical to demonstrate that a prudent process was followed, which is key to defending against fiduciary breach claims. Q31. Which of the following is NOT a component of a prudent service provider selection process? A) Issuing a Request for Proposal (RFP). B) Reviewing the service provider's financial stability. C) Relying solely on the provider's marketing materials. D) Evaluating the qualifications of the personnel servicing the plan. Answer: C Rationale: A prudent process requires objective assessment. Solely relying on marketing materials is not a prudent approach.
Q32. A "bundled" service arrangement typically refers to: A) One provider offering multiple services (e.g., recordkeeping, administration, and investments). B) A plan with multiple unrelated service providers. C) A plan with investments from multiple fund families. D) A plan with high fees. Answer: A Rationale: A bundled arrangement provides efficient processes by combining services like recordkeeping, administration, and investments under one provider. Q33. Which of the following statements regarding plan fees is TRUE? A) Fiduciaries are not required to monitor fees. B) Fees must be reasonable for the services provided. C) The lowest fee is always the best choice. D) Revenue sharing is the only way to pay plan fees. Answer: B Rationale: ERISA requires that plan fees be reasonable for the services provided. Q34. A plan's "party in interest" includes all of the following EXCEPT: A) A plan participant. B) The plan sponsor. C) A service provider to the plan. D) A competitor of the plan sponsor. Answer: D Rationale: Parties in interest include participants, the plan sponsor, service providers, and certain others. A competitor is not a party in interest. Q35. The primary purpose of a Request for Proposal (RFP) is to: A) Guarantee the lowest price. B) Evaluate and compare potential service providers in a structured way. C) Create a legal contract. D) Market the plan to new participants.
advice does not generally constitute investment advice, though the DOL has since sought to classify rollovers as fiduciary advice. Q39. A plan fiduciary should document all of the following EXCEPT: A) The committee's decision to hire a service provider. B) The process for monitoring investments. C) Informal discussions with other advisors. D) The rationale for removing an investment option. Answer: C Rationale: Formal decisions and processes should be documented. Informal discussions are not typically part of the formal fiduciary record. Q40. The primary benefit of a fiduciary file is to: A) Provide a record of the prudent decision-making process. B) Increase plan expenses. C) Create more work for the committee. D) Satisfy the plan sponsor's insurance requirements. Answer: A Rationale: The fiduciary file serves as a record of the prudent process used in making and monitoring plan decisions. Questions 41-60: Fiduciary Oversight and Investment Monitoring Q41. A fiduciary is monitoring a plan investment that has consistently underperformed its benchmark for three years. The most prudent action is to: A) Immediately remove the fund from the lineup. B) Document the review process and consider whether removal is appropriate. C) Do nothing, as past performance is not indicative of future results. D) Send a warning letter to the fund manager. Answer: B Rationale: Fiduciaries must document their investment review process. The
decision to retain or remove an underperforming fund must be based on a prudent process and documented accordingly. Q42. A target date fund's "glide path" refers to: A) The fee schedule for the fund. B) How the asset allocation becomes more conservative as the target date approaches. C) The fund's historical performance. D) The fund's marketing strategy. Answer: B Rationale: Target date funds follow a glide path where the equity allocation decreases and the bond allocation increases over time. Q43. Which of the following is a Qualified Default Investment Alternative (QDIA)? A) A stable value fund. B) A money market fund. C) A target date fund. D) The plan's company stock fund. Answer: C Rationale: A target date fund, target risk fund, or a managed account are common QDIAs. Q44. When evaluating a service provider, which factor is generally the LEAST important? A) Financial stability of the provider. B) Experience with plans of similar size and complexity. C) Willingness to provide revenue sharing to offset plan fees. D) Qualifications of personnel who will service the plan. Answer: C Rationale: While revenue sharing can offset plan fees, it should not be the primary selection factor. Qualifications, experience, and financial stability are more critical.
Answer: A Rationale: The best-interest standard is a key component of the Impartial Conduct Standards. Q49. Which of the following is a key element of a prudent investment review process? A) Reviewing investments every 5 years. B) Comparing fund performance against an appropriate benchmark. C) Only reviewing the plan's best-performing funds. D) Relying on the fund's marketing materials. Answer: B Rationale: Comparing performance against an appropriate benchmark is essential to a prudent review. Q50. When a plan offers employer stock as an investment option, the fiduciary must: A) Ensure all participants invest in it. B) Comply with ERISA's diversification and risk requirements. C) Avoid it entirely. D) Only offer it to executives. Answer: B Rationale: Fiduciaries must ensure that offering employer stock complies with ERISA's diversification and risk requirements. Q51. A plan fiduciary delegates investment responsibilities to a 3(38) investment manager. The fiduciary's ongoing responsibility is to: A) Approve every investment transaction. B) Monitor the manager's performance and fees. C) Accept all recommendations without question. D) Only review the manager annually. Answer: B Rationale: Even with delegation, the fiduciary must monitor the manager's performance and reasonableness of fees.
Q52. The DOL's "Fee Disclosure" regulation (408(b)(2)) requires that: A) Participants must pay all fees directly. B) Service providers disclose their compensation and any conflicts of interest to the plan sponsor. C) The plan sponsor must pay the lowest possible fees. D) All fees must be paid by the employer. Answer: B Rationale: The 408(b)(2) regulation requires service providers to disclose compensation and conflicts to plan fiduciaries. Q53. A plan fiduciary should consider all of the following when selecting investments EXCEPT: A) Historic performance of the fund. B) The fund's expense ratio. C) The fund's manager tenure. D) The plan sponsor's personal investment preferences. Answer: D Rationale: Fiduciaries must consider the plan participants' interests and prudent investment criteria, not the sponsor's personal preferences. Q54. An "active" versus "passive" investment management strategy primarily refers to: A) The level of participant engagement. B) Whether the fund is actively buying and selling securities to outperform a benchmark or tracks a benchmark. C) The frequency of the investment committee meetings. D) The fee structure only. Answer: B Rationale: Active management attempts to outperform a benchmark; passive management tracks a benchmark. Q55. Which of the following is a key indicator of a potential conflict of interest for an investment advisor?
Answer: B Rationale: A watch list allows fiduciaries to closely monitor underperforming funds or funds with other issues. Q59. The fiduciary duty of "diversification" requires: A) Investing all assets in a single high-return fund. B) Minimizing the risk of large losses by investing in a variety of asset classes. C) Avoiding all equity investments. D) Investing only in fixed-income securities. Answer: B Rationale: Diversification is designed to minimize the risk of large losses by spreading assets across various investments. Q60. Which of the following is a common mistake of plan fiduciaries? A) Documenting their decisions. B) Following the IPS. C) Failing to review service provider fees. D) Having a diverse investment menu. Answer: C Rationale: Failing to conduct a regular and thorough review of service provider fees is a common and significant fiduciary breach. Questions 61-80: Participant Outcomes and Plan Design Q61. Based on behavioral finance research, which of the following is a best practice for improving participant outcomes? A) Adding a self-directed brokerage option. B) Combining auto-enrollment with targeted education. C) Offering group meetings focused solely on rational decision-making. D) Re-enrolling all participants into equity investments.
Answer: B Rationale: Behavioral finance research shows that auto-enrollment combined with targeted education effectively increases participation and savings rates. Q62. Which of the following plan designs may result in better participant deferral behavior? A) Adding a matching contribution equal to 25% up to 12% of compensation deferred. B) Adding a 3% nonelective safe harbor contribution. C) Adding a 1,000 hours of service requirement to receive the match. D) Adding a profit-sharing contribution. Answer: A Rationale: A matching contribution that encourages participants to save more can improve deferral behavior. Q63. Which of the following is NOT a benefit of promoting participant retirement readiness? A) Employers can better manage their workforce needs. B) Participants receive a guarantee of lifetime income payments. C) Employees may be more satisfied with their jobs. D) Employers can work with service providers who have tools to assist participants. Answer: B Rationale: Retirement readiness programs do not guarantee lifetime income payments, except through specific annuity products. Q64. A 401(k) plan has poor participation among rank-and-file employees. All of the following are recommendations to boost participation EXCEPT: A) Increasing the match amount. B) Allowing participant loans. C) Adding a profit-sharing contribution based on years of service. D) Adding an auto-enrollment feature.
