NAPA CPFA Exam Most Tested Questions – 80 Multiple
Choice Practice Questions with Answers and Rationales |
Certified Plan Fiduciary Advisor (CPFA) Test Bank | Pass
Guaranteed
Module 1: Fiduciary Management Under ERISA
Q1. Under ERISA, the "Exclusive Purpose Rule" requires a fiduciary to act:
A) In the best interest of the employer sponsoring the plan
B) Solely in the best interest of plan participants and beneficiaries ✅
C) To maximize investment returns regardless of risk
D) Primarily to minimize plan administrative costs
Explanation: The Exclusive Purpose Rule (ERISA §404(a)(1)(A)) mandates that fiduciaries
act for the exclusive purpose of providing benefits to participants and beneficiaries and
defraying reasonable administrative expenses—not for the benefit of the employer or
advisor.
Q2. Which of the following is NOT one of the four core components of the ERISA Fiduciary
Standard of Care?
A) Prudence
B) Loyalty
C) Maximization of short-term returns ✅
D) Diversification
Explanation: The four duties are prudence, loyalty, diversification, and following the plan
document. Maximizing short-term returns is not a fiduciary duty and may conflict with
prudent long-term investing.
, Q3. A person can become an ERISA fiduciary by:
A) Only being explicitly named in the plan document
B) Exercising discretionary authority or control over plan management or assets ✅
C) Providing clerical services to the plan
D) Receiving a fee for services from the plan
Explanation: Fiduciary status is determined by function, not title. Even without being
named, a person becomes a fiduciary by exercising discretionary authority or control over
plan management, assets, or investment advice.
Q4. Which of the following actions would most likely establish a fiduciary relationship under
ERISA?
A) Processing participant distribution requests
B) Providing professional investment advice on a regular basis with discretionary authority
✅
C) Answering participant questions about plan features
D) Calculating employer matching contributions
Explanation: Providing professional investment advice with discretionary authority is a
fiduciary function. Ministerial tasks (processing distributions, answering questions,
calculating contributions) do not create fiduciary status.
Q5. A "named fiduciary" under ERISA is:
A) Any advisor who provides investment education
B) The person or entity specifically named in the plan document with discretionary authority
over plan management or administration ✅
C) Any participant who makes self-directed investment elections
D) The custodian holding plan assets
, Explanation: Named fiduciaries are explicitly identified in the plan document and have legal
authority to control plan operations. Every plan must have at least one named fiduciary.
Q6. Under the Best Interest Contract Exemption (BICE), financial advisers must do all of the
following EXCEPT:
A) Acknowledge fiduciary status
B) Adhere to impartial conduct standards
C) Guarantee investment returns ✅
D) Disclose fees and conflicts fairly
Explanation: BICE requires fiduciary acknowledgment, impartial conduct (prudent advice,
no misleading statements, reasonable compensation), enforceable contracts, policies to
prevent violations, and fee disclosure. Guaranteeing returns is never required and may be
inappropriate.
Q7. Which of the following is considered investment "education" rather than investment
"advice" under ERISA?
A) Recommending a specific fund to a participant based on their age
B) Providing general asset allocation models without personal recommendations ✅
C) Advising a participant to increase their contribution rate to 15%
D) Suggesting a target-date fund based on a participant's retirement year
Explanation: General asset allocation models and plan information constitute education.
Specific recommendations about which fund to choose or how much to contribute based on
personal circumstances cross the line into advice.
Q8. A 3(38) investment manager differs from a 3(21) investment advisor in that the 3(38)
fiduciary:
A) Has no fiduciary liability
, B) Has discretionary authority to select and monitor investments without plan sponsor pre-
approval ✅
C) Cannot be held liable for investment losses
D) Must be an internal employee of the plan sponsor
REMOVE DOTS
Here is the NAPA CPFA® Certification Exam MCQ Bank with all dots removed from
question numbers and answer choices.
NAPA CPFA® CERTIFICATION EXAM – PRACTICE MCQ BANK
Module 1: Fiduciary Management Under ERISA
Q1 Under ERISA, the "Exclusive Purpose Rule" requires a fiduciary to act
A) In the best interest of the employer sponsoring the plan
B) Solely in the best interest of plan participants and beneficiaries ✅
C) To maximize investment returns regardless of risk
D) Primarily to minimize plan administrative costs
Explanation: The Exclusive Purpose Rule (ERISA §404(a)(1)(A)) mandates that fiduciaries
act for the exclusive purpose of providing benefits to participants and beneficiaries and
defraying reasonable administrative expenses—not for the benefit of the employer or
advisor
Choice Practice Questions with Answers and Rationales |
Certified Plan Fiduciary Advisor (CPFA) Test Bank | Pass
Guaranteed
Module 1: Fiduciary Management Under ERISA
Q1. Under ERISA, the "Exclusive Purpose Rule" requires a fiduciary to act:
A) In the best interest of the employer sponsoring the plan
B) Solely in the best interest of plan participants and beneficiaries ✅
C) To maximize investment returns regardless of risk
D) Primarily to minimize plan administrative costs
Explanation: The Exclusive Purpose Rule (ERISA §404(a)(1)(A)) mandates that fiduciaries
act for the exclusive purpose of providing benefits to participants and beneficiaries and
defraying reasonable administrative expenses—not for the benefit of the employer or
advisor.
Q2. Which of the following is NOT one of the four core components of the ERISA Fiduciary
Standard of Care?
A) Prudence
B) Loyalty
C) Maximization of short-term returns ✅
D) Diversification
Explanation: The four duties are prudence, loyalty, diversification, and following the plan
document. Maximizing short-term returns is not a fiduciary duty and may conflict with
prudent long-term investing.
, Q3. A person can become an ERISA fiduciary by:
A) Only being explicitly named in the plan document
B) Exercising discretionary authority or control over plan management or assets ✅
C) Providing clerical services to the plan
D) Receiving a fee for services from the plan
Explanation: Fiduciary status is determined by function, not title. Even without being
named, a person becomes a fiduciary by exercising discretionary authority or control over
plan management, assets, or investment advice.
Q4. Which of the following actions would most likely establish a fiduciary relationship under
ERISA?
A) Processing participant distribution requests
B) Providing professional investment advice on a regular basis with discretionary authority
✅
C) Answering participant questions about plan features
D) Calculating employer matching contributions
Explanation: Providing professional investment advice with discretionary authority is a
fiduciary function. Ministerial tasks (processing distributions, answering questions,
calculating contributions) do not create fiduciary status.
Q5. A "named fiduciary" under ERISA is:
A) Any advisor who provides investment education
B) The person or entity specifically named in the plan document with discretionary authority
over plan management or administration ✅
C) Any participant who makes self-directed investment elections
D) The custodian holding plan assets
, Explanation: Named fiduciaries are explicitly identified in the plan document and have legal
authority to control plan operations. Every plan must have at least one named fiduciary.
Q6. Under the Best Interest Contract Exemption (BICE), financial advisers must do all of the
following EXCEPT:
A) Acknowledge fiduciary status
B) Adhere to impartial conduct standards
C) Guarantee investment returns ✅
D) Disclose fees and conflicts fairly
Explanation: BICE requires fiduciary acknowledgment, impartial conduct (prudent advice,
no misleading statements, reasonable compensation), enforceable contracts, policies to
prevent violations, and fee disclosure. Guaranteeing returns is never required and may be
inappropriate.
Q7. Which of the following is considered investment "education" rather than investment
"advice" under ERISA?
A) Recommending a specific fund to a participant based on their age
B) Providing general asset allocation models without personal recommendations ✅
C) Advising a participant to increase their contribution rate to 15%
D) Suggesting a target-date fund based on a participant's retirement year
Explanation: General asset allocation models and plan information constitute education.
Specific recommendations about which fund to choose or how much to contribute based on
personal circumstances cross the line into advice.
Q8. A 3(38) investment manager differs from a 3(21) investment advisor in that the 3(38)
fiduciary:
A) Has no fiduciary liability
, B) Has discretionary authority to select and monitor investments without plan sponsor pre-
approval ✅
C) Cannot be held liable for investment losses
D) Must be an internal employee of the plan sponsor
REMOVE DOTS
Here is the NAPA CPFA® Certification Exam MCQ Bank with all dots removed from
question numbers and answer choices.
NAPA CPFA® CERTIFICATION EXAM – PRACTICE MCQ BANK
Module 1: Fiduciary Management Under ERISA
Q1 Under ERISA, the "Exclusive Purpose Rule" requires a fiduciary to act
A) In the best interest of the employer sponsoring the plan
B) Solely in the best interest of plan participants and beneficiaries ✅
C) To maximize investment returns regardless of risk
D) Primarily to minimize plan administrative costs
Explanation: The Exclusive Purpose Rule (ERISA §404(a)(1)(A)) mandates that fiduciaries
act for the exclusive purpose of providing benefits to participants and beneficiaries and
defraying reasonable administrative expenses—not for the benefit of the employer or
advisor
