NAPA CPFA® CERTIFICATION EXAM
2025/2026 WITH 100% ACCURATE
ANSWERS
1. What is the primary purpose of the Best Interest Contract Exemption
under the DOL fiduciary regulation?
To allow financial advisers to continue current compensation
practices while ensuring they act in the best interests of their
customers.
To eliminate all forms of compensation for financial advisers.
To restrict financial advisers from providing investment advice.
To mandate that all financial advisers work for non-profit
organizations.
2. If a fiduciary fails to follow the ERISA exclusive purpose rule, what could
be a potential consequence?
Improved plan compliance
Increased investment returns
Enhanced participant satisfaction
Legal liability for breaching fiduciary duties
3. Describe how the IRS's treatment of multiple entities as a single
employer affects retirement plan design.
It simplifies compliance with ERISA regulations.
It allows employers to design plans that benefit all employees
equally.
It prevents employers from providing greater benefits to
owners and HCEs in one entity compared to rank-and-file
,employees in another entity.
It encourages the establishment of separate plans for each entity.
,4. Which of the following statements regarding penalties from prohibited
transactions under ERISA is/are true?
I. Fiduciaries have personal liability to make good on any losses
resulting from their breaches.
II. Personal assets of fiduciaries may be used to restore losses due to
their breaches to a plan.
III. In addition to the fiduciary restoring the plan to the position it would
have been in if the breach had not occurred, the DOL may impose a
penalty on the fiduciary.
I, II and III
I and III only
II and III only
I only
II only
5. A parent-subsidiary group exists if the parent company owns what
percentage of voting stock in another corporation?
At least 80%.
More than 80%.
At least 50%.
More than 50%.
6. Describe the implications of prohibited transactions in the context of
retirement plans.
Prohibited transactions have no impact on compliance with
ERISA regulations.
Prohibited transactions can lead to financial losses for the plan
and potential legal actions against fiduciaries.
, Prohibited transactions are beneficial for increasing plan assets.
Prohibited transactions only affect individual participants'
accounts.
7. Why is it important for fiduciaries to review and compare different
service providers?
To avoid any fees associated with the services.
To ensure that providers/contracts meet the goals of the plan.
To limit the number of providers to one.
To favor providers with the highest commissions.
8. What is the primary purpose of fiduciary meetings in the context of
retirement plans?
To ensure due diligence and compliance with fiduciary
responsibilities.
To set annual budgets for the retirement plan.
To discuss investment strategies only.
To evaluate employee performance.
9. Generally, under best practice standards, how often should an
Employee Retirement Income Security Act investment committee meet?
Every other month
Every other year
Once a year
Quarterly or twice a year
Every month
10. Explain why understanding employee demographics is important when
2025/2026 WITH 100% ACCURATE
ANSWERS
1. What is the primary purpose of the Best Interest Contract Exemption
under the DOL fiduciary regulation?
To allow financial advisers to continue current compensation
practices while ensuring they act in the best interests of their
customers.
To eliminate all forms of compensation for financial advisers.
To restrict financial advisers from providing investment advice.
To mandate that all financial advisers work for non-profit
organizations.
2. If a fiduciary fails to follow the ERISA exclusive purpose rule, what could
be a potential consequence?
Improved plan compliance
Increased investment returns
Enhanced participant satisfaction
Legal liability for breaching fiduciary duties
3. Describe how the IRS's treatment of multiple entities as a single
employer affects retirement plan design.
It simplifies compliance with ERISA regulations.
It allows employers to design plans that benefit all employees
equally.
It prevents employers from providing greater benefits to
owners and HCEs in one entity compared to rank-and-file
,employees in another entity.
It encourages the establishment of separate plans for each entity.
,4. Which of the following statements regarding penalties from prohibited
transactions under ERISA is/are true?
I. Fiduciaries have personal liability to make good on any losses
resulting from their breaches.
II. Personal assets of fiduciaries may be used to restore losses due to
their breaches to a plan.
III. In addition to the fiduciary restoring the plan to the position it would
have been in if the breach had not occurred, the DOL may impose a
penalty on the fiduciary.
I, II and III
I and III only
II and III only
I only
II only
5. A parent-subsidiary group exists if the parent company owns what
percentage of voting stock in another corporation?
At least 80%.
More than 80%.
At least 50%.
More than 50%.
6. Describe the implications of prohibited transactions in the context of
retirement plans.
Prohibited transactions have no impact on compliance with
ERISA regulations.
Prohibited transactions can lead to financial losses for the plan
and potential legal actions against fiduciaries.
, Prohibited transactions are beneficial for increasing plan assets.
Prohibited transactions only affect individual participants'
accounts.
7. Why is it important for fiduciaries to review and compare different
service providers?
To avoid any fees associated with the services.
To ensure that providers/contracts meet the goals of the plan.
To limit the number of providers to one.
To favor providers with the highest commissions.
8. What is the primary purpose of fiduciary meetings in the context of
retirement plans?
To ensure due diligence and compliance with fiduciary
responsibilities.
To set annual budgets for the retirement plan.
To discuss investment strategies only.
To evaluate employee performance.
9. Generally, under best practice standards, how often should an
Employee Retirement Income Security Act investment committee meet?
Every other month
Every other year
Once a year
Quarterly or twice a year
Every month
10. Explain why understanding employee demographics is important when
