Download NAPA CPFA Certification Actual Exam 2026/2027 | Certified Plan Fiduciary Advisor | and more Exams Business Systems in PDF only on Docsity!
NAPA CPFA Certification Actual Exam
2026 /2027 | Certified Plan Fiduciary
Advisor | Verified Questions & Answers |
Grade A
Q: Under the DOL regulation, many advisors to retirement plans and their participants will be
Answer 3(21) fiduciaries. They will act alongside other fiduciary service providers who are also not necessarily named in the plan document but who exercise discretionary control over plan provisions or plan investments.
Q: The advisor should educate the
Answer plan sponsor about hiring fiduciary service providers, including the different roles service providers, including the different roles service providers may take on within the plan, how to select a qualified candidate, and the plan sponsor's ongoing responsibility to monitor them.
Q: The fiduciary definition has two parts:
Answer who is a fiduciary to what extent the person is a fiduciary Clarifying fiduciary status is arguably incomplete without addressing both.
Q: A best practice for a service provider's formal description of services might therefore
include two parts: Answer a. an acknowledgment of fiduciary status b. clarification as to the extent of responsibilities
Q: As a non-fiduciary advisor, you can
Answer educate your client and present possible investments for the Retirement Plan Committee consideration.
Q: If you recommend a specific fund replacement to the plan sponsor or plan participants, you
are considered to be Answer giving investment advice and are therefore a functional fiduciary to the plan.
Q: If fiduciaries of participants use your recommendations - as opposed to information - to
make investment decisions, this could be considered Answer a fiduciary act
Q: A 3(21) fiduciary does not serve as a fiduciary investment manager, but instead usually as
Answer investment advice fiduciary
Q: f your client wants an advisor to manager plan investments, or just the QDIA, they can hire
a Answer 3(38) fiduciary advisor.
Q: A 3(21) fiduciary advisors can recommend investments but the final decision on which
investments to choose is up to the Answer plan fiduciaries.
Q: A 3(16) plan administrator can take on administrative duties for the plan but does not act in
Answer an investment capacity.
Q: A non-fiduciary advisors can provide
Answer
education
Q: The DOL is not required to be notified if
Answer the plan hires a 3(21) advisor.
Q: The fiduciaries should do a review of the service provider qualifications in order to prove a
Answer prudent process was not followed when selecting the service provider. They should also review the service agreement, document the decision process, and have a service agreement with the 3(21) advisor.
Q: A 3(21) advisor fiduciary is considered a
Answer fiduciary to the plan, but different than advisors working as 3(38) fiduciaries, it is rarely named in the plan document.
Q: The service agreement between the plan sponsor and the TPA is what determines if
Answer a TPA will work as a 3(16) fiduciary Plan Administrator.
by asking about documents he or she may be missing from the fiduciary file. For example: Are there any plan amendments? Does he or she have copies of the required participant notices (including participant fee disclosure) and account statements? Where are the 408(b)(2) fee disclosure notices? Does he or she have evidence that looked at the fee disclosure to determine if plan fees are reasonable? You can also assist the plan sponsor in identifying the plan service providers who may have copies of these documents, and assist him in setting up a fiduciary file. You may also want to show the sponsor a sample DOL investigation letter, so he is aware of what the DOL might ask in advance of an investigation. You can point out that unsigned documents or amendments and/or missing and incomplete plan documentation may put him at risk in an audit. You should assure the that Plan Sponsor is aware of both your role as an investment fiduciary regulations and what documentation she may need to review based on specific financial institution requirements. The advisor or the CPA is not responsible for the required plan amendments. The TPA or ERISA counsel can prepare the required amendment.
The plan docs need to be amended when there is a law change that impacts the plan, or when the fiduciaries are changing the plan provisions. It is the fiduciaries' responsibility to distribute fee disclosures notices, the record keeper is the one who prepares them. The plan document, IPS, and SPD are only required to be updated if changes have been made by the plan fiduciaries or law changes require a plan amendment and changes to the SPD. Fiduciaries have personal liability for a "breach" of their duties. It is important to remind the fiduciaries that an investment involving a party in interest is prohibited even if it has been beneficial to the plan participants and beneficiaries. The prohibited transaction still must be corrected. Correcting prohibited transactions may or may not be done through the DOL Voluntary Fiduciary Corrections Program (VFCP). Regardless, it is not the advisor's role to correct prohibited transactions. Fiduciaries should consult an ERISA attorney to identified
Improper valuation of privately held employer stock and purchasing a stock investment based on a tip from a broker are errors that cannot be corrected using the DOL correction program. It is the position of the DOL that plan fiduciaries need the information contained in the 408(b)(2) disclosures when selecting and monitoring services providers in order to satisfy their fiduciary obligations under ERISA. As a result, there is a fiduciary duty for plan sponsors and/or committees to utilize and demonstrate a prudent process to evaluate the services, fees, potential conflicts of interest and fiduciary status of the service providers. If the plan fiduciaries do not understand the information in the disclosures, they should get help from someone who does. Plan sponsors do not have access to benchmarking data in order to evaluate the fees of service of providers. Advisors can offer these benchmarking services. Advisors can not only help plan sponsors and committees navigate the fiduciary issues of 408(b)(2), but are themselves subject to: rules on reasonableness of compensation, adequacy and appropriateness of services provided, and identifying and managing conflicts of interest. The plan sponsor, the plan administrator, and plan trustee will almost always be fiduciaries to the plan.
Whenever someone is a fiduciary to the plan they are personally liable for any plan losses if they breach their fiduciary responsibility, which goes beyond making contributions timely. Fiduciary liability can never be totally delegated to service providers. The interests of the plan sponsor should not be a factor when making plan decisions. Fiduciaries must follow the plan's governing documents If the plan fiduciary delegates fiduciary duties to other fiduciaries in accordance with the plan document - such as delegating to an investment manager, allocation of duties to a discretionary trustee or appointment of a TPA who serves as the named Plan Administrator: they are not directly liable for the duties delegated, although they are still responsible for overseeing the service providers for whom they delegated the duties. The main responsibilities of the plan sponsor are prudently selecting and monitoring named fiduciaries and maintaining plan records.
Under ERISA, the Plan Admin has the following roles, except? Redesigning the plan's employer matching contribution formula Under ERISA, all of the following are Plan Trustee responsibilities, except? Oversee the plan administrator All of the following may be named fiduciaries in a plan document, except? 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? 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? Make decisions 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 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 DOL investigation letter will usually ask for no more than five items related to the plan's operation. Which statement regarding the IRS and the DOL corrections programs is true? The DOL website includes an online calculator that calculates earnings earnings amounts to be paid to the plan. All of the following statements describe characteristics of ERISA fidelity bonds and fiduciary insurance, except? 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? Hires the plans investment advisor. All of the following documents should be maintained to show fiduciary best practices, except? Documentation of selection process for new payroll vendor.
All of the following describe non-fiduciary individuals performing ministerial functions, except? A human resources director decides to fully vest a terminated employee because of his excellent work history. Plans and objectives:
- What are the primary concerns (tax benefits to the business and the owners, attracting and retaining employee rank and file participant retirement outcome?)
- Which group(s) of employees is the plan sponsor looking to benefit (rank and file employees, mid-management, higher management, owners?)
- Is there one or more groups of employees who may not need the plan or unlikely to participate in the plan? Business structure and type:
- What type of business entity is the plan sponsor?
- What does the census data look like for the employer? Related company ownership:
- Who are the owners of the business and what percent do they own? (family members, what relationship?)
- Do the owners of the current business or the current business own any other businesses?
- Do the family members of the owners of the current business own any other businesses? Business cash flow and budget:
- What is the contribution budget available?
- Does the business have stable cash flow?
Advisors can add value by pointing out the advantages and disadvantages of different eligibility requirements. Examples:
- Do your current plan eligibility provisions work well with your plan goals?
- Do you know why they were selected?
- Can your HR staff and/or payroll system effectively handle employees who are immediately eligible for the plan?
- Would staff be able to process immediate entry into the plan along with automatic enrollment?
- Are you comfortable making matching contributions every payroll period?
- Do you have a lot of turnover?
- Would a one-year wait help manage the impact of that turnover?
- Would a requirement to work on the last day of the plan year help manage the cost of turnover?
- Are there employee groups that you would like to exclude from the plan if it is possible to do? Contributions can have a major impact in supporting plan goals as well as plan costs. Advisors should be familiar with different contribution provisions and consider the following when designing contribution provisions:
- Is there a philosophy on making employer contributions?
- Is the objective to maximize contributions to the principal employees?
- What is the objective and budget for non-principal employees?
- Is there one or more group of employees who may not need the plan or who are unlikely to participate in the plan?
- How important is it that your employees be on track for an adequate retirement income?
administration, fees are charged to the participants taking the loan or the hardship withdrawal, so they don't affect participants not taking loan or hardships. In owner-driven plans, advisors should caution owners and partners to to administer their loan programs for themselves, just as they do for the other plan participants. There are advantages to participants in allowing rollovers into the plan from another plan or IRA:
- Participants can consolidate their retirement accounts.
- Generally, investing in a 401k is more cost effective than investing in an IRA
- Participants can take advantage of loans and hardship withdrawal provisions of the qualified plan.
- Participants have access to professionally managed 401k investments. Large companies may want to consider a traditional 401k with auto enrollment and a matching contribution. Because of their large size, they are less likely to consider a safe-harbor design. Pros of traditional 401k:
- Elective deferrals allow employees to save on a tax-preferred basis for retirement
- Employer matching contributions reward employee savings
- Automatic enrollment designs create better participant outcomes
- Roth 401(k) deferrals allow for tax-free savings
- Catch up contributions allow additional savings for employees 50 and older
- Safe harbor contributions can exempt a plan from nondiscrimination testing
- Employees can select investments individualized to their needs
- Designs can be flexible enough to allow for both principal and non-principal savings benefits Cons of traditional 401k:
- Complex to administer and design; multiple contribution sources make record-keeping complicated
- Safe harbor contributions are fixed not flexible
- Matching contributions can also be a fixed contribution commitment
- Subject to ADP/ACP testing, unless the plan uses a safe harbor design SEP or SIMPLE plans are attractive to start up firms because they are less expensive to administer. The other problem typically seen in SIMPLE IRAs is that employers do not realize the plans have a required contribution component and often have not made those contributions to the plan. Although 401k plans are more complicated to administer, they allow more flexibility in design for both owners and employees to save for retirement. A partnership that has stable long-term cash flow and wants to speed up retirement contributions for the partners, might want to consider a
