CPFA EXAM NEWEST ACTUAL EXAM 2025 QUESTIONS AND DETAILED CORRECT ANSWERS, Exams of Nursing

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CPFA EXAM NEWEST ACTUAL EXAM

2025 QUESTIONS AND DETAILED

CORRECT ANSWERS | 100% CORRECT

ANSWERS

A traditional 401k plan maybe an appropriate choice for all of the following employers, EXCEPT: A) An employer who feels strongly that his or her employees should take an active role in saving for retirement. B) An employer whose first priority is to maximize his or her retirement savings. C) An employer who is paternalistic and wants to help employees save by enacting automatic enrollment provisions. D) An employer who wants to encourage employee participation with matching contributions. Correct Answer B) An employer whose first priority is to maximize his or her retirement savings. An owner-driven plan sponsor wants to retire in five to ten years. His company has a stable cash flow and ten employees. All of the following plan designs are compatible with the owner's goals, EXCEPT: A) 401 (k) cross-tested safe harbor plan B) Defined benefit/defined contribution combination plan C) 401(k) safe harbor plan

D) SIMPLE IRA Correct Answer D) SIMPLE IRA An owner-driven plan sponsor wants to know the advantages of a safe harbor 401(k) plan. All of the following are advantages EXCEPT: A) Safe harbor contributions can exempt the plan from the ADP test. B) Safe harbor contributions may be taken as a hardship withdrawal. C) Safe harbor contributions are discretionary. D) Safe harbor contributions can satisfy top-heavy minimum contribution requirements. Correct Answer C) Safe harbor contributions are discretionary. All of the following plan features are typically located in the plan's adoption agreement, EXCEPT: A) Availability of participant loans B) Availability of in-service withdrawals C) Matching contribution formula D) Definition of ERISA fiduciary roles and responsibilities Correct Answer D) Definition of ERISA fiduciary roles and responsibilities All of the following are advantages of the request for proposal (RFP) process in a participant-driven plan, EXCEPT: A) The RFP allows the fiduciaries to delegate the selection of finalists to the plan advisor and the TPA.

B) Plan advisor can assist the fiduciaries in compiling a list of potential service providers. C) Fiduciaries can make an "apples to apples" comparison of fees and services. D) The RFP and the responses can be part of the documentation that a prudent process was followed. Correct Answer A) The RFP allows the fiduciaries to delegate the selection of finalists to the plan advisor and the TPA. All of the following service providers may assist with plan document maintenance, EXCEPT: A) ERISA attorney B) Recordkeeper C) TPA firm D) Plan auditor Correct Answer D) Plan auditor All of the following describe the required participant disclosure process, EXCEPT: A) The Plan Administrator or Plan Sponsor can hire a 3(16) fiduciary to distribute required participant notices. B) The party that distributes required notices to participants is considered a fiduciary. C) Generally, a TPA may prepare the safe harbor 401(k) notice. D) The Plan Administrator is responsible for the required disclosures being distributed to the participants. Correct Answer B) The party that distributes required notices to participants is considered a fiduciary.

All of the following are important factors when selecting a service provider, EXCEPT: A) Service provider's financial stability B) Experience with plans of similar size and complexity C) Willingness to provide revenue sharing to offset plan fees D) Qualifications of personnel that will service plan Correct Answer C) Willingness to provide revenue sharing to offset plan fees A 401(k) plan has poor participation among the rank-and- file employees. As a plan advisor, all of the following recommendations could boost plan participation, EXCEPT: A) Increasing the match amount from 25% to 50% of deferrals B) Allowing participant loans C) Adding a profit-sharing contribution based on years of service D) Add and auto-enrollment feature to the plan Correct Answer C) Adding a profit-sharing contribution based on years of service A safe harbor 401(k) plan with a cross-tested profit- sharing contribution may be an appropriate choice for all of the following employers, EXCEPT: A) A 1,500 employee manufacturing firm

B) A professional partnership with three partners and 50 employees C) A dentist's office with one owner and five employees D) A medical services company with 25 employees and two owners Correct Answer A) A 1,500 employee manufacturing firm ERISA requires that fiduciaries manage the plan for the exclusive benefit of which of the following parties? A) Participants and their beneficiaries B) Plan Sponsor C) Plan Administrator D) Business owner Correct Answer A) Participants and their beneficiaries June is a Plan Sponsor of a small plan and decided she'll be acting as the sole fiduciary of the plan. All of the following are her responsibilities, EXCEPT: A) Give investment advice to participants B) Fill the role of Plan Administrator C) Follow a prudent process when hiring service providers D) Sign and file the Form 5500 Correct Answer A) Give investment advice to participants Under ERISA, the Plan Administrator has the following roles, EXCEPT: A) Providing participants with a summary plan description

B) Redesigning the plan's employer matching contribution formula C) Distributing required notices to participants D) Providing the plan document to participants who request a copy Correct Answer B) Redesigning the plan's employer matching contribution formula Under ERISA, all of the following are Plan Trustee responsibilities, EXCEPT: A) Monitor the investment manager whom the Plan Trustee hired. B) Oversee the Plan Administrator. C) Delegate specific investment duties to a service provider and monitor the service provider's performance. D) Follow participant directions for the investment of contributions, unless the instructions conflict with ERISA. Correct Answer B) Oversee the Plan Administrator. All of the following may be named fiduciaries in a plan document, EXCEPT: A) Plan Sponsor B) Plan Administrator C) Plan Trustee D) Legal counsel who prepares the plan document Correct Answer D) Legal counsel who prepares the plan document Sue is a plan advisor for the ABC Retirement Plan. On the agenda for the upcoming ABC Plan Committee meeting is an action item to replace Len and nominate a new

member to the Committee. Len has been asked to leave the Committee due to his unsatisfactory attendance at monthly meetings. All of the following are best practices regarding fiduciary changes, EXCEPT: A) Per Len's request, the Committee minutes will exclude the reason Len was asked to leave the committee. B) Sue should educate the members on the importance of documenting fiduciary changes. C) The Committee minutes should document the process of naming Len's replacement. D) The new member should be informed of the goals of the Committee and attendance requirements. Correct Answer A) Per Len's request, the Committee minutes will exclude the reason Len was asked to leave the committee. Sharon is a 3(21) advisor. She is meeting with a potential client and is preparing for her meeting. All of the following are services that Sharon may offer the prospect, EXCEPT: A) Attend the client's investment committee meetings. B) Create the agendas for the client's investment committee meetings. C) Assist with the review of the investments. D) Make decision to replace funds on the watch list pursuant to the investment policy statement, prior to attending the investment committee meeting. Correct Answer D) Make decision to replace funds on the watch

list pursuant to the investment policy statement, prior to attending the investment committee meeting. All of the following represent potential breaches of fiduciary responsibility by plan fiduciaries, EXCEPT: A) A Plan Trustee delegates some of his responsibilities to a discretionary trustee who he continues to monitor. B) A Plan Sponsor chooses a bank's recordkeeping service without performing due diligence because the bank provides reduced rates on corporate banking services. C) A Plan Trustee deposits weekly payroll deferrals at the end of the quarter. D) A Plan Sponsor appoints a consultant to monitor the plan's service provider but then ignores the consultant's findings. Correct Answer A) A Plan Trustee delegates some of his responsibilities to a discretionary trustee who he continues to monitor. All of the following statements represent the DOL's role in overseeing plans, EXCEPT: A) Upon investigation the DOL may request information to identify whether a prohibited transaction has occurred. B) The DOL has provided correction methods for specific prohibited transactions. C) The DOL and IRS work together to coordinate enforcement on prohibited transaction issues.

D) A DOL investigation letter will usually ask for no more than five items related to the plan's operation. Correct Answer D) A DOL investigation letter will usually ask for no more than five items related to the plan's operation. Which statement regarding the IRS and DOL correction programs is TRUE? A) The IRS and DOL correction programs cover identical plan errors. B) The Voluntary Fiduciary Correction Program can be used only when an error is found during a DOL investigation. C) The DOL website includes an online calculator that calculates earnings amounts to be paid to the plan. D) The Employee Plans Compliance Resolution System is used to correct prohibited transaction violations. Correct Answer C) The DOL website includes an online calculator that calculates earnings amounts to be paid to the plan. All of the following statements describe characteristics of ERISA fidelity bonds and fiduciary insurance, EXCEPT: A) Fiduciary insurance may protect plan fiduciaries from losses resulting from errors. B) An ERISA fidelity bond protects the employee from any error made when submitting contributions to a service provider. C) Plan assets may be used to purchase a fidelity bond.

D) An ERISA fidelity bond may be set-up as a blanket bond that covers all officers, directors, and employees of a plan sponsor. Correct Answer B) An ERISA fidelity bond protects the employee from any error made when submitting contributions to a service provider. Larry is the owner of DEF Company. Which of Larry's activities is considered a fiduciary function? A) Establishes a 401(k) plan for his company. B) Determines the plan's employer matching contribution formula. C) Hires the plan's investment advisor. D) Decides to terminate the 401(k) plan. Correct Answer C) Hires the plan's investment advisor. All of the following documents should be maintained to show fiduciary best practices, EXCEPT: A) Current fee benchmarking report for administration services B) Documentation of selection process for new payroll vendor C) Copies of retirement plan committee meeting minutes D) Copies of retirement plan committee agendas Correct Answer B) Documentation of selection process for new payroll vendor All of the following documents are updated annually, EXCEPT:

A) 404(a)(5) participant fee disclosure B) Plan document C) Qualified default investment alternative notice D) Safe Harbor Matching 401(k) notices Correct Answer B) Plan document All of the following are consequences of fiduciary breaches, EXCEPT: A) A fiduciary should make good on any losses caused by his or her fiduciary breach. B) A fiduciary should restore any profits to the plan that had resulted due to his or her fiduciary breach. C) The corporate veil protects fiduciaries from personal liability. D) A fiduciary who has committed a breach may be removed and prohibited against serving as a fiduciary in the future. Correct Answer C) The corporate veil protects fiduciaries from personal liability. All of the following are best practices for determining the reasonableness of plan fees, EXCEPT: A) Determine whether each individual expense is reasonable. B) Research revenue sharing arrangements to determine the underlying cost of services. C) Determine whether any expenses paid to fiduciaries have violated the conflict of interest rules.

D) Owner-driven plans are not required to determine the reasonableness of plan fees due to their limited personnel and financial resources. Correct Answer D) Owner-driven plans are not required to determine the reasonableness of plan fees due to their limited personnel and financial resources. All of the following fees may be paid from the plan, EXCEPT: A) TPA fee for Form 5500 preparation B) Fee associated with union negotiations regarding retirement plan benefits C) Recordkeeper fee for maintaining participant accounts D) Investment advisory fee Correct Answer B) Fee associated with union negotiations regarding retirement plan benefits All of the following are parties-in-interest to the STU, Inc. Profit Sharing Plan, EXCEPT: A) Brian, who is a plan participant and the president's brother B) XYZ Inc., who is seeking to acquire STU, Inc. C) Independent auditor of the Plan's financial statements D) Legal counsel to the Plan Correct Answer B) XYZ Inc., who is seeking to acquire STU, Inc. ERISA defines the following as plan fiduciaries, EXCEPT: A) Plan Sponsor

B) Plan Accountant C) Plan Trustee D) Plan Administrator Correct Answer B) Plan Accountant All of the following describe non-fiduciary individuals performing ministerial functions, EXCEPT: A) A benefits administrator prepares the summary plan description. B) A human resources director decides to fully vest a terminated employee because of his excellent work history. C) An ERISA attorney updates a client's plan document to comply with current law. D) A payroll manager prepares the weekly deferral deposit and forwards it to the plan provider. Correct Answer B) A human resources director decides to fully vest a terminated employee because of his excellent work history. Which statement regarding "to" and "through" target date funds is TRUE? A) If a majority of participants cash out of a plan upon retirement, a "through" strategy may be appropriate. B) A "to" target date fund may be a good choice if many retirees have account balances in the plan. C) A key difference between "to" and "through" target date funds are their glide paths.

D) A "through" target date fund develops its asset allocation based on the participant's risk tolerance. Correct Answer C) A key difference between "to" and "through" target date funds are their glide paths. All of the following describe qualified default investment alternative (QDIA) rules, EXCEPT: A) A plan must use a QDIA as its default fund. B) Participants receive an initial QDIA notice when first defaulted into the QDIA. C) A balanced fund qualifies as a QDIA. D) An appropriate QDIA qualifies for fiduciary safe harbor relief. Correct Answer A) A plan must use a QDIA as its default fund. All of the following statements about revenue sharing are TRUE, EXCEPT: A) Excess revenue sharing can revert to the plan sponsor. B) Revenue sharing can be used to pay plan operational expenses. C) Revenue sharing can be credited to participant accounts. D) Revenue sharing is subject to the ERISA prudency rules. Correct Answer A) Excess revenue sharing can revert to the plan sponsor. Jack is a plan advisor and is meeting with his client, the JKL 401(k) Plan Committee to conduct an investment

review. All of the following are best practices in an investment review, EXCEPT: A) Investment performance is compared against the investment policy statement criteria. B) Jack discusses the plan's demographics and how changes impact participant outcomes. C) Investments are put on the watch list if they do not meet the investment policy statement criteria. D) Investments that provide revenue sharing must be removed from the investment line-up. Correct Answer D) Investments that provide revenue sharing must be removed from the investment line-up. All of the following are components of gap analysis, EXCEPT: A) Projection of participant's current account balance through retirement B) Beneficiary's tax liability of account balance after participant's death C) Participant's deferral rate D) Projected investment return Correct Answer B) Beneficiary's tax liability of account balance after participant's death All of the following are characteristics of target date funds, EXCEPT: A) They are designed so that the equity portion decreases as the fund nears a specified date.

B) They are diversified to minimize the risk of large losses. C) They can be used to reduce fiduciary liability under the qualified default investment alternative rules. D) They require less fiduciary oversight than other types of funds. Correct Answer D) They require less fiduciary oversight than other types of funds. All of the following are characteristics of asset allocation funds, EXCEPT: A) They are generally designed to be the sole investment holding for a participant. B) They provide guaranteed retirement income for participants. C) They have exposure to multiple asset classes. D) They are designed to meet a specific objective. Correct Answer B) They provide guaranteed retirement income for participants. The JKL Company recently established a 401(k) Plan and hired Larry as its plan advisor. The Plan Committee, with Larry's assistance, has just finalized the investment policy statement. The next step is to start the investment selection process. Larry is planning to discuss all the following issues regarding investment selection, EXCEPT: A) The investment line-up should be diversified. B) Self-directed brokerage accounts may be offered only to investment savvy participants. C) Investment fees must be reasonable.

D) The investments selected should represent asset classes across a risk/reward spectrum. Correct Answer B) Self-directed brokerage accounts may be offered only to investment savvy participants. A new client with a 401(k) plan wants to add funds to enhance the diversification of the Plan. Which of the following tasks should be completed first when considering adding funds to the plan? A) Prepare the new 404(a)(5) disclosures. B) Establish dates for employee meetings to explain the investment changes. C) Review the investment policy statement and confirm the asset classes permitted in the plan. D) Order new enrollment kits. Correct Answer C) Review the investment policy statement and confirm the asset classes permitted in the plan. Which of the following parties typically maintains the investment policy statement? A) Plan advisor B) CFO C) Plan accountant D) HR manager Correct Answer A) Plan advisor All the following statements regarding the timing of investment meetings are TRUE, EXCEPT:

A) An investment policy statement must specifically state how often the investments are reviewed. B) A plan advisor may assist in the scheduling of investment meetings. C) An investment policy statement should be reviewed at least annually. D) Smaller, owner-driven plans typically perform an annual investment review. Correct Answer A) An investment policy statement must specifically state how often the investments are reviewed. The BIG fund has produced investment results consistently above its benchmarks. Recently, tobacco company stocks were added to its portfolio. Upon hearing the news, several members of the Retirement Plan committee declared their opposition to the tobacco industry and stated they wanted the fund removed from the investment line-up. The investment policy statement (IPS) does not include any selection criteria regarding socially responsible investing. The Committee may take all the following actions, EXCEPT: A) If the Committee decides to remove the fund, the IPS must be updated to permit this removal. B) The Committee must consider the participants' needs. C) No action can be taken due to the fund's superior performance. D) The issue should be documented Correct Answer C) No action can be taken due to the fund's superior performance.

Which statement regarding service providers is TRUE? A) A TPA performs annual compliance testing. B) A recordkeeper has the legal obligation to provide an interpretation of a plan provision. C) An accountant processes the "money out" for a participant account. D) A plan advisor is responsible for drafting annual safe harbor notices. Correct Answer A) A TPA performs annual compliance testing. Which statement regarding bundled service arrangements is TRUE? A) Provides efficient contribution and distribution processes. B) Requires less fiduciary oversight than an unbundled service arrangement. C) Permits for specific single provider within the arrangement to be easily removed and replaced with another provider. D) Typical arrangement involves a TPA and an insurance company. Correct Answer A) Provides efficient contribution and distribution processes. Based on behavioral finance research, which of the following is a best practice for producing successful participant outcomes? A) Combining auto-enrollment with targeted education. B) Adding a self-directed brokerage option.

C) Re-enrolling all participants into equity investments. D) Offering group meetings that focus on participants' rational decision making. Correct Answer A) Combining auto-enrollment with targeted education. Company ABC and Company DEF are determined to be part of a related group of companies. All the following are TRUE except: A) The employees of both ABC and DEF may end up participating in one plan. B) ABC may be required to make contributions for its employees into DEF's plan. C) DEF has the right to "opt out" and be excluded from the related group. D) If DEF adopts a plan, ABC employees may be eligible for the plan. Correct Answer C) DEF has the right to "opt out" and be excluded from the related group. Which of the following plan designs may result in better participant deferral behavior? A) Adding an employer 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 employer matching contribution. D) Adding a profit-sharing contribution. Correct Answer A) Adding an employer matching contribution equal to 25% up to 12% of compensation deferred.

An advisor is meeting with a Plan Sponsor to discuss contribution design in her plan. All of the following questions will help with this conversation, EXCEPT: A) Is there a goal that employees should be required to contribute to receive an employer contribution? B) Can participants convert their existing contribution accounts to Roth accounts? C) Is there a group of employees who are unlikely to participate in the plan? D) How important is it that employees are on track for adequate retirement income? Correct Answer B) Can participants convert their existing contribution accounts to Roth accounts? Jake is a sole proprietor and has just established a software development company. He has recently hired two employees. Currently, the company does not have a good cash flow, but if Jake can hire more software engineers, growth and profits should increase. Based on that information, all of the following are questions that an advisor should ask when establishing a plan for Jake's company, EXCEPT: A) Can the company's current cash flow support employer contributions? B) Does the company have an established line of credit? C) What are Jake's objectives for attracting future employees?

D) Is Jake willing to make a fixed contribution if it enables him to save more? Correct Answer B) Does the company have an established line of credit? A partnership is a business that: A) Cannot have a limited liability structure. B) Has at least two partners. C) Is typically run by a board of directors. D) Reports income on form 1120. Correct Answer B) Has at least two partners. All of the following describe the impact of a business's cash flow and budget when establishing a plan, EXCEPT: A) A plan advisor should inform the employer that required contributions will be waived for any year that the company does not make a profit. B) A plan advisor should explain a plan's contribution commitment to the employer. C) Employers should have a stable cash flow if they are considering adopting a Defined Benefit/Defined Contribution combination plan. D) A plan advisor may work with the service provider to show estimates of what employer contributions would be under different contribution formulas. Correct Answer A) A plan advisor should inform the employer that required contributions will be waived for any year that the company does not make a profit.

Which of the following reports can be used in measuring plan effectiveness and participant outcomes? A) Number of terminated participants who elected to roll their accounts into IRAs. B) Average deferral rate of participants in the plan. C) Independent accountant's required annual audit of the plan. D) Summary Annual Report. Correct Answer B) Average deferral rate of participants in the plan. All of the following are benefits of participant retirement readiness, EXCEPT: 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 when working for an employer that actively promotes retirement readiness programs. D) Employers can work with service providers who have tools to assist participants in increasing retirement savings. Correct Answer B) Participants receive a guarantee of lifetime income payments. All of following are items to consider when developing a strategy to promote successful participant outcomes, EXCEPT: A) What is the average life expectancy for the participants' beneficiaries?

B) Should investment advice be offered? C) Is senior level management interested in promoting "retirement readiness"? D) What type of participant education should be provided? Correct Answer A) What is the average life expectancy for the participants' beneficiaries? All of the following statements describe the re-enrollment process of reinvesting participant accounts in the plan's asset allocation funds, EXCEPT: A) The re-enrollment of participant accounts is considered a behavioral finance method. B) Participants are given the opportunity to "opt-out" of the re-enrollment of their account balances. C) The goal of the re-enrollment process is to improve participant outcomes by automatically investing their account balances in asset allocation funds appropriate for their age. D) Participant notices are not required. Correct Answer D) Participant notices are not required. Which statement regarding IRA plans and 401k plans is TRUE? A) SIMPLE IRA plans are used to maximize plan benefits to owners. B) SIMPLE IRAs and 401ks have the same plan document requirements. C) Participant loans are allowed from a SIMPLE 401k plan but not a SIMPLE IRA.

D) An employer may sponsor a SIMPLE IRA and a 401k plan in the same calendar year. Correct Answer C) Participant loans are allowed from a SIMPLE 401k plan but not a SIMPLE IRA. Which statement describes a benefit of using target date funds as a qualified default investment alternative? A) They offer a professionally managed investment. B) They provide a guaranteed rate of interest. C) They require minimal fiduciary oversight. D) They guarantee against loss of principal. Correct Answer A) They offer a professionally managed investment. Which statement regarding investment options is TRUE? A) Asset allocation funds are designed to be the sole investment holding for a participant. B) Collective investment funds are managed by insurance companies. C) Balanced funds are designed to shift to more conservative investments as the participant ages. D) Stable value funds are a good choice for a qualified default investment alternative. Correct Answer A) Asset allocation funds are designed to be the sole investment holding for a participant. All of the following statements generally describe passively managed investment funds, EXCEPT: