NAPA CPFA Certification Exam Flash Cards 2026/2027 PDF – Verified Questions & Answers with Detailed Rationales | Certified Plan Fiduciary Advisor Exam Prep | Instant Download Description:

NAPA CPFA® CERTIFICATION EXAM
CONTENT OUTLINE FLASH CARDS
2026/2027 EDITION | VERIFIED
QUESTIONS & ANSWERS WITH
RATIONALES

SECTION 1: FIDUCIARY ROLES AND RESPONSIBILITIES (Questions 1-
50)
Q1: Under ERISA, a person becomes a fiduciary to the extent they exercise
what over plan assets?
A) Ministerial authority or processing
B) Discretionary authority or control
C) Administrative responsibility
D) Contractual oversight
Answer: B) Discretionary authority or control
Rationale: Under ERISA Section 3(21)(A), fiduciary status is determined by
function, not title. A person becomes a fiduciary to the extent they exercise
discretionary authority or control over the management of the plan or disposition
of plan assets. Administrative or ministerial functions without discretion do not
confer fiduciary status .


Q2: Which of the following best describes the ERISA "Exclusive Purpose
Rule"?
A) Fiduciaries must invest exclusively in low-risk investments
B) Fiduciaries must act solely in the interest of participants and beneficiaries
C) Fiduciaries must maximize plan sponsor profits
D) Fiduciaries must only consider participants with the largest account balances

,Answer: B) Fiduciaries must act solely in the interest of participants and
beneficiaries
Rationale: The Exclusive Purpose Rule requires fiduciaries to discharge their
duties solely in the interest of plan participants and beneficiaries. This includes
providing benefits to participants and using plan assets only to pay for benefits and
reasonable administrative costs .


Q3: What is the "Prudent Expert Rule" under ERISA?
A) A guarantee that investments will not lose value
B) A requirement to act with the care, skill, and diligence of a knowledgeable
professional
C) A rule that prohibits any investment in risky assets
D) A regulation that only applies to large retirement plans
Answer: B) A requirement to act with the care, skill, and diligence of a
knowledgeable professional
Rationale: Under ERISA Section 404(a)(1)(B), fiduciaries must act with the care,
skill, prudence, and diligence that a prudent person familiar with such matters
would use. This is the "prudent expert rule"—a higher standard than ordinary care,
recognizing that fiduciaries are expected to have specialized knowledge .


Q4: Which of the following best describes a "Named Fiduciary"?
A) Anyone who gives investment advice to the plan
B) The individual or entity identified in the plan document with fiduciary authority
and control
C) The third-party administrator who processes daily plan transactions
D) All plan participants over a certain age
Answer: B) The individual or entity identified in the plan document with fiduciary
authority and control

,Rationale: The plan document must name at least one fiduciary (the "Named
Fiduciary") who has ultimate authority over the plan's management and control.
This person or entity can delegate certain responsibilities to other fiduciaries .


Q5: What is the primary difference between a 3(21) and a 3(38) fiduciary?
A) A 3(21) is a non-fiduciary, while a 3(38) is a fiduciary
B) A 3(21) provides non-discretionary advice, while a 3(38) has discretionary
authority over investments
C) A 3(21) is responsible for plan administration, while a 3(38) is responsible for
plan investments
D) There is no difference; they are the same
Answer: B) A 3(21) provides non-discretionary advice, while a 3(38) has
discretionary authority over investments
Rationale: A 3(21) Investment Advisor provides advice and recommendations, but
the plan sponsor retains the final decision-making authority. A 3(38) Investment
Manager has full discretionary authority to select, monitor, and replace plan
investments .


Q6: Which of the following would NOT be considered a "ministerial act" by a
service provider?
A) Processing a loan request
B) Deciding which investment funds to remove from the plan's lineup
C) Allocating contributions to participant accounts
D) Preparing government-mandated Form 5500
Answer: B) Deciding which investment funds to remove from the plan's lineup
Rationale: Ministerial acts are routine, non-discretionary tasks performed
according to plan documents and sponsor instructions. Deciding which investments
to remove is a discretionary fiduciary act .

, Q7: What is the "Best Interest Contract Exemption" (BICE) designed to allow?
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A) Advisors to receive prohibited compensation as long as they adhere to a "best
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interest" standard
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B) Plan sponsors to avoid all fiduciary responsibilities
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C) Plan participants to self-direct their own investments without any oversight
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D) TPAs to perform discretionary plan management
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Answer: A) Advisors to receive prohibited compensation as long as they adhere to a
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"best interest" standard
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Rationale: The DOL's BICE allowed financial institutions and advisors to receive
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certain compensation (like commissions) that would otherwise be prohibited,
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provided they contractually commit to a "best interest" standard of care and disclose
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conflicts of interest .
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Q8: Which of the following is a "prohibited transaction" under ERISA?
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A) Paying a reasonable salary to a plan administrator
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B) A plan loaning money to the plan sponsor's CEO at market rates
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C) Investing in a broad-market index fund k k k k k




D) Hiring an independent auditor to review plan finances
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Answer: B) A plan loaning money to the plan sponsor's CEO at market rates
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Rationale: A transaction between the plan and a "party in interest" (like the CEO of
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the plan sponsor) is prohibited, even if the terms are fair. Loans between a plan and a
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party-in-interest are specifically banned .
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Q9: Which entity has primary enforcement authority over ERISA's fiduciary
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provisions?
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A) Internal Revenue Service (IRS) k k k




B) Securities and Exchange Commission (SEC) k k k k




C) Department of Labor (DOL) k k k




D) Pension Benefit Guaranty Corporation (PBGC) k k k k