NAPA CPFA EXAM STUDY GUIDE
2026/2027 ACCURATE QUESTIONS WITH
CORRECT DETAILED SOLUTIONS ||
100% GUARANTEED PASS
<NEWEST VERSION>
1. Explain ERISA exclusive purpose and ERISA prudence rule - ANSWER
✔ The Exclusive Purpose Rule: A fiduciary must act solely in the
best interest of plan participants.
The Fiduciary Standard of Care: Prudence, Loyalty, Diversification, Follow the
Plan Document
2. Identify actions that might establish a fiduciary relationship - ANSWER ✔
assuming significant control over another person's property or finances,
having a high degree of trust and confidence placed in you by another party,
making decisions on behalf of someone else with their best interests in mind,
providing professional advice in a field where expertise is required,
managing assets on behalf of another person, and entering into a legal
agreement where one party is explicitly designated as a fiduciary, such as a
trust or will.
3. Identify named fiduciaries - ANSWER ✔ Persons or entities specifically
named in the plan document
4. Explain roles and responsibilities of named fiduciaries - ANSWER ✔
Discretionary authority over
management or the
administration of the plan
5. Identify actions covered by the Best Interest Contract Exemption -
ANSWER ✔ Acknowledge fiduciary status for itself and its financial
advisers;
,Adhere to basic standards of impartial conduct, including: Giving prudent
advice that is in the customer's best interest (i.e., based on the investment
objectives, risk tolerance, financial circumstances, and needs of the retirement
investors, without regard to financial or other interests of the financial
institution or financial adviser); Avoiding making misleading statements; and
Charging no more than reasonable compensation
Commit to the impartial conduct standards in an enforceable contract when
providing advice to an IRA owner
Implement policies and procedures reasonably and prudently designed to
prevent violations of the impartial conduct standards
Refrain from giving or using incentives for financial advisers to act contrary to
the customer's best interest
Fairly disclose the fees, compensation, and material conflicts of interest
associated with their recommendations.
6. Differentiate investment advice and investment education - ANSWER ✔
Education = guidance to help others makes their OWN decisions
Advice: significant detail about an employee's personal finances, goals and risk
tolerance are gathered in order to make projections.
7. Identify main consequences of not documenting prudent process for
reviewing fees and services - ANSWER ✔ personally liable to restore any
losses to the plan, or to restore any profits made through improper use of the
plan's assets resulting from their actions. A fiduciary's liability for a breach
may also include a 20 percent penalty assessed by the Department of Labor
(DOL), removal from his or her fiduciary position, and, in extreme cases,
criminal penalties
8. Compare and contrast a Fidelity bond and fiduciary insurance - ANSWER
✔ ERISA Fidelity Bond: Required by law, protects the PLAN
ERISA Fidelity Bond: Required by law, protects the PLAN
9. List considerations when formulating plan goals and objectives - ANSWER
✔ • Are tax benefits to owners a primary concern? (owner-driven plan?)
• It is important to maximize benefits to the owners? (owner-driven
plan?)
• How important is it to attract/retain new employees? (EE-driven
plan?)
, • What are the employee demographics (age, salary, turnover)?
• Is there a group of employees unlikely to participate?
• Is company cash flow consistent, stable?
• Should employer contributions be flexible, or fixed?
• Is the company growing?
• What type of business entity is the plan sponsor?
10.Identify Plan Sponsor's business structure and related entities - ANSWER
✔
11.Explain impact of family and related company ownership on plan design -
ANSWER ✔ The primary reason that the Internal Revenue Service (IRS)
treats multiple entities as a single employer for retirement plan purposes is to
prevent the creation of multiple entities to circumvent certain
nondiscrimination requirements. In other words, employers with multiple
entities could take advantage of creative plan design approaches to provide a
greater retirement benefit to owners and highly compensated employees
(HCEs) in one entity than to the rank-and-file employees of another entity.
12.Under Fidelity's Volume Submitter Adoption Agreement, any participating
related employer must be identified in your plan's Adoption Agreement by
listing each related employer's name and its Employer Tax Identification
Number under section 1.02(b) & the Participating Employer's Addendum. If
a related employer has their own plan, they are not listed in the Adoption
Agreement for this plan.
13.Types of controlled group relationships - ANSWER ✔ 1. Parent-subsidiary
- this exists if at least 80% of the stock of a company is owned by a parent or
another organization. 2. Brother-sister - this exists if 5 or fewer individuals
collectively own more than 80% of the stock of each brother-sister
corporation. These same individuals would own more than 50% of the stock
of each corporation, when considering only the identical common ownership
in each corporation for each individual. 3. A combined group relationship -
this exists if the first two types both exist in the controlled group.
14.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 - ANSWER ✔ a. Participants and their
beneficiaries
15.All the tasks below are responsibilities of an advisor related to retirement
plan committee meetings EXCEPT (Select 3):
I. Recommend that committee members receive
fiduciary training
II. Assist the committee with their roles and
responsibilities
III. Educate the committee on the importance of
documentation
IV. Communicate plan changes as a result of committee
meetings to the plan's service providers
V. Select the committee members
VI. Vote on committee decisions
VII. Oversee the service providers
a. I, III, IV
b. II, V, VI
c. IV, V, VI
d. V, VI, VII - ANSWER ✔ d. V, VI, VII
16.The attributes of strong retirement plan committees are: (Select 3)
I. Have a retirement plan committee charter
II. Have only permanent committee members
2026/2027 ACCURATE QUESTIONS WITH
CORRECT DETAILED SOLUTIONS ||
100% GUARANTEED PASS
<NEWEST VERSION>
1. Explain ERISA exclusive purpose and ERISA prudence rule - ANSWER
✔ The Exclusive Purpose Rule: A fiduciary must act solely in the
best interest of plan participants.
The Fiduciary Standard of Care: Prudence, Loyalty, Diversification, Follow the
Plan Document
2. Identify actions that might establish a fiduciary relationship - ANSWER ✔
assuming significant control over another person's property or finances,
having a high degree of trust and confidence placed in you by another party,
making decisions on behalf of someone else with their best interests in mind,
providing professional advice in a field where expertise is required,
managing assets on behalf of another person, and entering into a legal
agreement where one party is explicitly designated as a fiduciary, such as a
trust or will.
3. Identify named fiduciaries - ANSWER ✔ Persons or entities specifically
named in the plan document
4. Explain roles and responsibilities of named fiduciaries - ANSWER ✔
Discretionary authority over
management or the
administration of the plan
5. Identify actions covered by the Best Interest Contract Exemption -
ANSWER ✔ Acknowledge fiduciary status for itself and its financial
advisers;
,Adhere to basic standards of impartial conduct, including: Giving prudent
advice that is in the customer's best interest (i.e., based on the investment
objectives, risk tolerance, financial circumstances, and needs of the retirement
investors, without regard to financial or other interests of the financial
institution or financial adviser); Avoiding making misleading statements; and
Charging no more than reasonable compensation
Commit to the impartial conduct standards in an enforceable contract when
providing advice to an IRA owner
Implement policies and procedures reasonably and prudently designed to
prevent violations of the impartial conduct standards
Refrain from giving or using incentives for financial advisers to act contrary to
the customer's best interest
Fairly disclose the fees, compensation, and material conflicts of interest
associated with their recommendations.
6. Differentiate investment advice and investment education - ANSWER ✔
Education = guidance to help others makes their OWN decisions
Advice: significant detail about an employee's personal finances, goals and risk
tolerance are gathered in order to make projections.
7. Identify main consequences of not documenting prudent process for
reviewing fees and services - ANSWER ✔ personally liable to restore any
losses to the plan, or to restore any profits made through improper use of the
plan's assets resulting from their actions. A fiduciary's liability for a breach
may also include a 20 percent penalty assessed by the Department of Labor
(DOL), removal from his or her fiduciary position, and, in extreme cases,
criminal penalties
8. Compare and contrast a Fidelity bond and fiduciary insurance - ANSWER
✔ ERISA Fidelity Bond: Required by law, protects the PLAN
ERISA Fidelity Bond: Required by law, protects the PLAN
9. List considerations when formulating plan goals and objectives - ANSWER
✔ • Are tax benefits to owners a primary concern? (owner-driven plan?)
• It is important to maximize benefits to the owners? (owner-driven
plan?)
• How important is it to attract/retain new employees? (EE-driven
plan?)
, • What are the employee demographics (age, salary, turnover)?
• Is there a group of employees unlikely to participate?
• Is company cash flow consistent, stable?
• Should employer contributions be flexible, or fixed?
• Is the company growing?
• What type of business entity is the plan sponsor?
10.Identify Plan Sponsor's business structure and related entities - ANSWER
✔
11.Explain impact of family and related company ownership on plan design -
ANSWER ✔ The primary reason that the Internal Revenue Service (IRS)
treats multiple entities as a single employer for retirement plan purposes is to
prevent the creation of multiple entities to circumvent certain
nondiscrimination requirements. In other words, employers with multiple
entities could take advantage of creative plan design approaches to provide a
greater retirement benefit to owners and highly compensated employees
(HCEs) in one entity than to the rank-and-file employees of another entity.
12.Under Fidelity's Volume Submitter Adoption Agreement, any participating
related employer must be identified in your plan's Adoption Agreement by
listing each related employer's name and its Employer Tax Identification
Number under section 1.02(b) & the Participating Employer's Addendum. If
a related employer has their own plan, they are not listed in the Adoption
Agreement for this plan.
13.Types of controlled group relationships - ANSWER ✔ 1. Parent-subsidiary
- this exists if at least 80% of the stock of a company is owned by a parent or
another organization. 2. Brother-sister - this exists if 5 or fewer individuals
collectively own more than 80% of the stock of each brother-sister
corporation. These same individuals would own more than 50% of the stock
of each corporation, when considering only the identical common ownership
in each corporation for each individual. 3. A combined group relationship -
this exists if the first two types both exist in the controlled group.
14.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 - ANSWER ✔ a. Participants and their
beneficiaries
15.All the tasks below are responsibilities of an advisor related to retirement
plan committee meetings EXCEPT (Select 3):
I. Recommend that committee members receive
fiduciary training
II. Assist the committee with their roles and
responsibilities
III. Educate the committee on the importance of
documentation
IV. Communicate plan changes as a result of committee
meetings to the plan's service providers
V. Select the committee members
VI. Vote on committee decisions
VII. Oversee the service providers
a. I, III, IV
b. II, V, VI
c. IV, V, VI
d. V, VI, VII - ANSWER ✔ d. V, VI, VII
16.The attributes of strong retirement plan committees are: (Select 3)
I. Have a retirement plan committee charter
II. Have only permanent committee members
