NAPA CPFA® Exam Prep: 100 Comprehensive
2026/2028 Practice Questions + Detailed Explanations
| INSTANT PDF DOWNLOAD
Module 1: Fiduciary Management under ERISA
1. Under ERISA, a person is a fiduciary to the extent they exercise what over plan assets?
A) Legal ownership
B) Physical custody
C) Discretionary authority or control
D) Administrative oversight
Explanation: Fiduciary status is based on function, not just title. Having discretionary
authority over plan management or asset disposition automatically triggers fiduciary
status.
2. The "Exclusive Benefit Rule" requires fiduciaries to act solely in the interest of:
A) The Plan Sponsor
B) Plan participants and beneficiaries
C) Shareholders of the company
D) The Department of Labor
Explanation: This is the Duty of Loyalty. Fiduciaries must prioritize participants and
beneficiaries over the interests of the employer or service providers.
3. Which standard of conduct requires a fiduciary to act with the care, skill, and
diligence of a "prudent person acting in a like capacity"?
A) The Business Judgment Rule
B) The Prudent Expert Rule
C) The Rule of 72
D) The Suitability Standard
Explanation: ERISA fiduciaries are held to a higher "Prudent Expert" standard,
meaning they must act as someone familiar with such matters would act.
4. What is the minimum required amount for an ERISA fidelity bond?
A) 5% of plan assets
B) 10% of plan assets (up to $500,000, or $1,000,000 for plans with company
stock)
,C) $50,000 flat fee
D) 100% of the previous year's contributions
Explanation: Every person who "handles" plan funds must be bonded for 10% of the
funds handled, with specific caps based on plan holdings.
5. Which of the following is an example of a "Settlor" function?
D) Deciding to terminate the plan
A) Selecting a new investment lineup
B) Monitoring the recordkeeper
C) Explaining plan benefits to an employee
Explanation: Settlor functions are business decisions made by the employer (like
starting, amending, or ending a plan) and are generally not subject to fiduciary
standards.
6. A fiduciary who breaches their duty is:
A) Personally liable for any losses to the plan
B) Only liable for the amount of their bond
C) Protected by corporate immunity
D) Only liable if the breach was intentional
Explanation: ERISA Section 409(a) makes fiduciaries personally liable to make good
any losses resulting from a breach of duty.
7. Which document outlines the procedures for selecting and monitoring plan
investments?
A) Summary Plan Description (SPD)
B) Investment Policy Statement (IPS)
C) Form 5500
D) Service Provider Agreement
Explanation: While not strictly required by law, the IPS is the primary "roadmap" for
fiduciary investment decisions and is considered a best practice.
8. When a fiduciary lacks the expertise to evaluate a specific investment, they
should:
A) Rely on the plan sponsor’s preference
B) Choose the option with the lowest fee
C) Hire an independent expert to assist
D) Avoid the investment category entirely
, Explanation: Prudence is measured by the process. If a fiduciary isn't an expert, they
must hire one to maintain the prudent process.
9. Co-fiduciary liability can occur if a fiduciary:
A) Disagrees with another fiduciary’s decision
B) Resigns from the committee
C) Has knowledge of a breach by another fiduciary and fails to take action
D) Is not present at a committee meeting
Explanation: Fiduciaries have a duty to prevent or remedy breaches by others;
staying silent on a known breach creates liability.
10. Which regulatory body has primary jurisdiction over ERISA fiduciary standards?
A) IRS
B) Department of Labor (DOL)
C) SEC
D) FINRA
Explanation: While the IRS handles tax-qualification, the DOL (EBSA) oversees the
fiduciary conduct and reporting requirements of ERISA.
Module 2: ERISA Plan Management I (Design & Operations)
11. A "Safe Harbor" 401(k) design is primarily used to:
A) Guarantee a 5% return
B) Automatically satisfy nondiscrimination testing (ADP/ACP)
C) Reduce recordkeeping fees
D) Eliminate the need for an audit
Explanation: By providing specific employer contributions and immediate vesting,
a Safe Harbor plan bypasses annual ADP/ACP testing.
12. Which vesting schedule is the maximum allowed for employer matching
contributions in a 401(k) plan?
A) 5-year cliff
B) 3-year cliff or 6-year graded
C) 7-year graded
D) 10-year cliff
Explanation: For defined contribution plans, matching contributions must vest at least
as fast as a 3-year cliff or 6-year graded schedule.
2026/2028 Practice Questions + Detailed Explanations
| INSTANT PDF DOWNLOAD
Module 1: Fiduciary Management under ERISA
1. Under ERISA, a person is a fiduciary to the extent they exercise what over plan assets?
A) Legal ownership
B) Physical custody
C) Discretionary authority or control
D) Administrative oversight
Explanation: Fiduciary status is based on function, not just title. Having discretionary
authority over plan management or asset disposition automatically triggers fiduciary
status.
2. The "Exclusive Benefit Rule" requires fiduciaries to act solely in the interest of:
A) The Plan Sponsor
B) Plan participants and beneficiaries
C) Shareholders of the company
D) The Department of Labor
Explanation: This is the Duty of Loyalty. Fiduciaries must prioritize participants and
beneficiaries over the interests of the employer or service providers.
3. Which standard of conduct requires a fiduciary to act with the care, skill, and
diligence of a "prudent person acting in a like capacity"?
A) The Business Judgment Rule
B) The Prudent Expert Rule
C) The Rule of 72
D) The Suitability Standard
Explanation: ERISA fiduciaries are held to a higher "Prudent Expert" standard,
meaning they must act as someone familiar with such matters would act.
4. What is the minimum required amount for an ERISA fidelity bond?
A) 5% of plan assets
B) 10% of plan assets (up to $500,000, or $1,000,000 for plans with company
stock)
,C) $50,000 flat fee
D) 100% of the previous year's contributions
Explanation: Every person who "handles" plan funds must be bonded for 10% of the
funds handled, with specific caps based on plan holdings.
5. Which of the following is an example of a "Settlor" function?
D) Deciding to terminate the plan
A) Selecting a new investment lineup
B) Monitoring the recordkeeper
C) Explaining plan benefits to an employee
Explanation: Settlor functions are business decisions made by the employer (like
starting, amending, or ending a plan) and are generally not subject to fiduciary
standards.
6. A fiduciary who breaches their duty is:
A) Personally liable for any losses to the plan
B) Only liable for the amount of their bond
C) Protected by corporate immunity
D) Only liable if the breach was intentional
Explanation: ERISA Section 409(a) makes fiduciaries personally liable to make good
any losses resulting from a breach of duty.
7. Which document outlines the procedures for selecting and monitoring plan
investments?
A) Summary Plan Description (SPD)
B) Investment Policy Statement (IPS)
C) Form 5500
D) Service Provider Agreement
Explanation: While not strictly required by law, the IPS is the primary "roadmap" for
fiduciary investment decisions and is considered a best practice.
8. When a fiduciary lacks the expertise to evaluate a specific investment, they
should:
A) Rely on the plan sponsor’s preference
B) Choose the option with the lowest fee
C) Hire an independent expert to assist
D) Avoid the investment category entirely
, Explanation: Prudence is measured by the process. If a fiduciary isn't an expert, they
must hire one to maintain the prudent process.
9. Co-fiduciary liability can occur if a fiduciary:
A) Disagrees with another fiduciary’s decision
B) Resigns from the committee
C) Has knowledge of a breach by another fiduciary and fails to take action
D) Is not present at a committee meeting
Explanation: Fiduciaries have a duty to prevent or remedy breaches by others;
staying silent on a known breach creates liability.
10. Which regulatory body has primary jurisdiction over ERISA fiduciary standards?
A) IRS
B) Department of Labor (DOL)
C) SEC
D) FINRA
Explanation: While the IRS handles tax-qualification, the DOL (EBSA) oversees the
fiduciary conduct and reporting requirements of ERISA.
Module 2: ERISA Plan Management I (Design & Operations)
11. A "Safe Harbor" 401(k) design is primarily used to:
A) Guarantee a 5% return
B) Automatically satisfy nondiscrimination testing (ADP/ACP)
C) Reduce recordkeeping fees
D) Eliminate the need for an audit
Explanation: By providing specific employer contributions and immediate vesting,
a Safe Harbor plan bypasses annual ADP/ACP testing.
12. Which vesting schedule is the maximum allowed for employer matching
contributions in a 401(k) plan?
A) 5-year cliff
B) 3-year cliff or 6-year graded
C) 7-year graded
D) 10-year cliff
Explanation: For defined contribution plans, matching contributions must vest at least
as fast as a 3-year cliff or 6-year graded schedule.
