CPFA PRACTICE EXAM (NAPA QUESTIONS) QUESTIONS AND CORRECT ANSWERS (VERIFIED
ANSWERS) PLUS RATIONALES 2026 Q&A | INSTANT DOWNLOAD PDF
CORE DOMAINS
ERISA Fiduciary Roles & Responsibilities
ERISA Fiduciary Oversight & Plan Governance
ERISA Plan Investment Management
ERISA Plan Management & Administration
Plan Fees & Service Provider Evaluation
Participant Outcomes & Retirement Readiness
Regulatory Compliance, Risk Management & Ethics
Qualified Default Investment Alternatives (QDIAs)
Fiduciary Standards of Care & Prohibited Transactions
Plan Design, Documentation & Committee Best Practices
INTRODUCTION
The NAPA CPFA (Certified Plan Fiduciary Advisor) Practice Examination assesses the advanced
knowledge and applied decision-making skills required of retirement plan advisors, consultants, and
fiduciaries. It evaluates mastery of ERISA fiduciary standards, plan governance, investment oversight,
fee benchmarking, participant outcomes, and regulatory compliance. The examination employs
multiple-choice and scenario-based questions to simulate real-world fiduciary decision-making.
Emphasis is placed on the Exclusive Purpose Rule, Prudence Rule, diversification, plan document
adherence, prohibited transactions, and QDIA requirements. This assessment prepares candidates for
the 70-question, 90-minute CPFA certification examination and for autonomous fiduciary advisory
practice.
SECTION ONE: QUESTIONS 1–100
1. Under ERISA Section 3(21), which of the following best describes when a person is considered a
fiduciary of an employee benefit plan?
A. When they are named as a fiduciary in the plan document
B. When they exercise any discretionary authority or control over plan management or disposition of
plan assets
C. When they provide investment advice to the plan sponsor for a fee
D. When they are employed by the plan sponsor
🟢 B. When they exercise any discretionary authority or control over plan management or disposition
of plan assets
🔴 RATIONALE: Under ERISA Section 3(21)(A), a person is a fiduciary to the extent they exercise any
discretionary authority or discretionary control respecting management of the plan or exercise any
authority or control respecting management or disposition of its assets. This is known as the
"functional fiduciary" test—fiduciary status is determined by the functions performed, not just by the
title.
2. A retirement plan advisor is hired to provide recommendations on the plan's investment menu
but does not have discretionary authority over plan assets. Under ERISA, this advisor is most likely
classified as a:
A. 3(16) Administrator
B. 3(21) Investment Advisor Fiduciary
,C. 3(38) Investment Manager
D. Named Fiduciary
🟢 B. 3(21) Investment Advisor Fiduciary
🔴 RATIONALE: A 3(21) fiduciary provides investment advice and recommendations but does not have
discretionary authority over plan assets. The plan sponsor or another fiduciary retains the discretion to
accept or reject the recommendations. In contrast, a 3(38) investment manager has full discretionary
authority over plan assets.
3. The Exclusive Purpose Rule under ERISA requires that a fiduciary:
A. Act solely in the interest of the plan sponsor
B. Act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of
providing benefits and defraying reasonable expenses
C. Maximize investment returns regardless of risk
D. Minimize plan expenses at all costs
🟢 B. Act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of
providing benefits and defraying reasonable expenses
🔴 RATIONALE: The Exclusive Purpose Rule (ERISA Section 404(a)(1)(A)) requires that a fiduciary
discharge their duties solely in the interest of participants and beneficiaries and for the exclusive
purpose of providing benefits to them and defraying reasonable expenses of administering the plan.
The rule prohibits fiduciaries from considering their own interests or those of the plan sponsor.
4. The "Prudent Man Rule" under ERISA requires that fiduciaries:
A. Invest only in government securities
B. Act with the care, skill, prudence, and diligence that a prudent person would use
C. Guarantee investment returns
D. Avoid all investment losses
🟢 B. Act with the care, skill, prudence, and diligence that a prudent person would use
🔴 RATIONALE: The Prudent Man Rule (ERISA Section 404(a)(1)(B)) requires fiduciaries to act with the
care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims.
5. 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. 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
🟢 B. ERISA fidelity bond protects the employee from any error made when submitting contributions
to a service provider
🔴 RATIONALE: Insurance protects fiduciaries; a bond is required and protects assets from theft and
fraud. The ERISA fidelity bond does not protect employees from submission errors; it protects the plan
from losses due to fraud or dishonesty by persons handling plan funds.
, 6. 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
🟢 C. The corporate veil protects fiduciaries from personal liability
🔴 RATIONALE: Fiduciaries can be held personally liable for breaches of fiduciary duty. The corporate
veil does not protect fiduciaries from personal liability under ERISA. A fiduciary who breaches their
duties may be personally liable to make good on losses and restore profits to the plan.
7. 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
🟢 A. Per Len's request, the Committee minutes will exclude the reason Len was asked to leave the
committee
🔴 RATIONALE: Fiduciary best practices require proper documentation of all committee actions,
including the reasons for fiduciary changes. Excluding information from the minutes at a member's
request is not a best practice and undermines transparency and accountability.
8. 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
🟢 D. Make decision to replace funds on the watch list pursuant to the investment policy statement,
prior to attending the investment committee meeting
🔴 RATIONALE: A 3(21) advisor provides recommendations but does not have discretionary authority
to make decisions. Replacing funds without committee approval would constitute exercising
discretionary authority, which is reserved for 3(38) investment managers. A 3(21) fiduciary cannot make
unilateral decisions to replace funds.
9. 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
ANSWERS) PLUS RATIONALES 2026 Q&A | INSTANT DOWNLOAD PDF
CORE DOMAINS
ERISA Fiduciary Roles & Responsibilities
ERISA Fiduciary Oversight & Plan Governance
ERISA Plan Investment Management
ERISA Plan Management & Administration
Plan Fees & Service Provider Evaluation
Participant Outcomes & Retirement Readiness
Regulatory Compliance, Risk Management & Ethics
Qualified Default Investment Alternatives (QDIAs)
Fiduciary Standards of Care & Prohibited Transactions
Plan Design, Documentation & Committee Best Practices
INTRODUCTION
The NAPA CPFA (Certified Plan Fiduciary Advisor) Practice Examination assesses the advanced
knowledge and applied decision-making skills required of retirement plan advisors, consultants, and
fiduciaries. It evaluates mastery of ERISA fiduciary standards, plan governance, investment oversight,
fee benchmarking, participant outcomes, and regulatory compliance. The examination employs
multiple-choice and scenario-based questions to simulate real-world fiduciary decision-making.
Emphasis is placed on the Exclusive Purpose Rule, Prudence Rule, diversification, plan document
adherence, prohibited transactions, and QDIA requirements. This assessment prepares candidates for
the 70-question, 90-minute CPFA certification examination and for autonomous fiduciary advisory
practice.
SECTION ONE: QUESTIONS 1–100
1. Under ERISA Section 3(21), which of the following best describes when a person is considered a
fiduciary of an employee benefit plan?
A. When they are named as a fiduciary in the plan document
B. When they exercise any discretionary authority or control over plan management or disposition of
plan assets
C. When they provide investment advice to the plan sponsor for a fee
D. When they are employed by the plan sponsor
🟢 B. When they exercise any discretionary authority or control over plan management or disposition
of plan assets
🔴 RATIONALE: Under ERISA Section 3(21)(A), a person is a fiduciary to the extent they exercise any
discretionary authority or discretionary control respecting management of the plan or exercise any
authority or control respecting management or disposition of its assets. This is known as the
"functional fiduciary" test—fiduciary status is determined by the functions performed, not just by the
title.
2. A retirement plan advisor is hired to provide recommendations on the plan's investment menu
but does not have discretionary authority over plan assets. Under ERISA, this advisor is most likely
classified as a:
A. 3(16) Administrator
B. 3(21) Investment Advisor Fiduciary
,C. 3(38) Investment Manager
D. Named Fiduciary
🟢 B. 3(21) Investment Advisor Fiduciary
🔴 RATIONALE: A 3(21) fiduciary provides investment advice and recommendations but does not have
discretionary authority over plan assets. The plan sponsor or another fiduciary retains the discretion to
accept or reject the recommendations. In contrast, a 3(38) investment manager has full discretionary
authority over plan assets.
3. The Exclusive Purpose Rule under ERISA requires that a fiduciary:
A. Act solely in the interest of the plan sponsor
B. Act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of
providing benefits and defraying reasonable expenses
C. Maximize investment returns regardless of risk
D. Minimize plan expenses at all costs
🟢 B. Act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of
providing benefits and defraying reasonable expenses
🔴 RATIONALE: The Exclusive Purpose Rule (ERISA Section 404(a)(1)(A)) requires that a fiduciary
discharge their duties solely in the interest of participants and beneficiaries and for the exclusive
purpose of providing benefits to them and defraying reasonable expenses of administering the plan.
The rule prohibits fiduciaries from considering their own interests or those of the plan sponsor.
4. The "Prudent Man Rule" under ERISA requires that fiduciaries:
A. Invest only in government securities
B. Act with the care, skill, prudence, and diligence that a prudent person would use
C. Guarantee investment returns
D. Avoid all investment losses
🟢 B. Act with the care, skill, prudence, and diligence that a prudent person would use
🔴 RATIONALE: The Prudent Man Rule (ERISA Section 404(a)(1)(B)) requires fiduciaries to act with the
care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims.
5. 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. 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
🟢 B. ERISA fidelity bond protects the employee from any error made when submitting contributions
to a service provider
🔴 RATIONALE: Insurance protects fiduciaries; a bond is required and protects assets from theft and
fraud. The ERISA fidelity bond does not protect employees from submission errors; it protects the plan
from losses due to fraud or dishonesty by persons handling plan funds.
, 6. 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
🟢 C. The corporate veil protects fiduciaries from personal liability
🔴 RATIONALE: Fiduciaries can be held personally liable for breaches of fiduciary duty. The corporate
veil does not protect fiduciaries from personal liability under ERISA. A fiduciary who breaches their
duties may be personally liable to make good on losses and restore profits to the plan.
7. 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
🟢 A. Per Len's request, the Committee minutes will exclude the reason Len was asked to leave the
committee
🔴 RATIONALE: Fiduciary best practices require proper documentation of all committee actions,
including the reasons for fiduciary changes. Excluding information from the minutes at a member's
request is not a best practice and undermines transparency and accountability.
8. 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
🟢 D. Make decision to replace funds on the watch list pursuant to the investment policy statement,
prior to attending the investment committee meeting
🔴 RATIONALE: A 3(21) advisor provides recommendations but does not have discretionary authority
to make decisions. Replacing funds without committee approval would constitute exercising
discretionary authority, which is reserved for 3(38) investment managers. A 3(21) fiduciary cannot make
unilateral decisions to replace funds.
9. 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
