NAPA CPFA® Certification Exam latest 200 questions and
correct answers 2026
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Module 1: Fiduciary Roles and Responsibilities (Questions 1–25)
1. Which of the following is an example of the ERISA "Exclusive Purpose Rule"?
- A) Investing plan assets in a high-growth fund that charges a significant fee.
- B) Selecting an investment fund because it benefits the plan sponsor's cousin who works at the
fund.
- C) Using a portion of plan assets to pay a plan service provider.
- D) Hiring a family member as a plan advisor to save on costs.
Answer: C
Rationale: The Exclusive Purpose Rule requires fiduciaries to act solely in the interest of plan
participants and beneficiaries. Using plan assets to pay for necessary, reasonable plan expenses
(like service providers) is permissible, as it benefits the plan's operation. Options B and D are
prohibited transactions due to self-dealing. Option A is not inherently a violation, but the duty
of prudence requires that the fee be reasonable.
2. Under the "Prudence Rule," what must a fiduciary demonstrate when selecting a plan
investment?
- A) The investment will outperform the market every year.
- B) They have followed a process to investigate the investment and its role in the portfolio.
- C) The investment has no fees associated with it.
,- D) A majority of plan participants voted for the investment.
Answer: B
Rationale: The Prudence Rule is a process-oriented standard. It does not require perfect
outcomes. Instead, a fiduciary must act "with the care, skill, prudence, and diligence" that a
prudent person would use. This means conducting a thorough investigation, comparing
alternatives, and documenting the decision-making process.
3. Which of the following best describes a "Named Fiduciary"?
- A) Anyone who gives investment advice to the plan.
- B) The individual or entity identified in the plan document with fiduciary authority and control.
- C) The third-party administrator (TPA) who processes daily plan transactions.
- D) All plan participants over a certain age.
Answer: B
Rationale: The plan document must name at least one fiduciary (the "Named Fiduciary") who
has ultimate authority over the plan's management and control. This person or entity can
delegate certain responsibilities to other fiduciaries.
4. A plan advisor recommends a specific fund to a plan sponsor. The advisor also provides a
detailed analysis of the fund's fees, performance, and risks. What is this considered?
- A) A prohibited transaction.
- B) Investment advice, creating a fiduciary relationship.
- C) Investment education, which does not create a fiduciary relationship.
- D) A ministerial act.
,Answer: B
Rationale: According to the DOL, providing a recommendation on a specific investment to a plan
or participant can be considered "investment advice," thereby making the advisor a fiduciary
under ERISA. Providing general educational information (e.g., asset allocation models) is not
considered advice.
5. Which type of fiduciary is hired to have discretionary authority over the plan's investment
decisions, including selecting and monitoring investment options?
- A) 3(16) Administrator
- B) 3(21) Investment Advisor
- C) 3(38) Investment Manager
- D) Non-fiduciary service provider
Answer: C
Rationale: A 3(38) Investment Manager is a fiduciary that accepts full discretionary authority for
the plan's investments. This shifts a significant amount of liability away from the plan sponsor. A
3(21) advisor provides non-discretionary advice, while a 3(16) Administrator handles
administrative tasks.
6. Which of the following actions is most likely to establish a person as a plan fiduciary?
- A) Exercising discretionary authority or control over plan management.
- B) Processing a participant's distribution request.
- C) Preparing a quarterly investment performance report.
- D) Recording contributions into participant accounts.
Answer: A
, Rationale: Under ERISA, a person is a fiduciary to the extent they exercise any discretionary
authority or control over the plan's management or assets, or render investment advice for a
fee. Ministerial tasks like processing distributions or recording contributions are not considered
fiduciary acts.
7. The "Best Interest Contract Exemption" (BICE) was designed to allow what?
- A) Advisors to receive prohibited compensation as long as they adhere to a "best interest"
standard.
- B) Plan sponsors to avoid all fiduciary responsibilities.
- C) Plan participants to self-direct their own investments without any oversight.
- D) TPAs to perform discretionary plan management.
Answer: A
Rationale: The DOL's BICE allowed financial institutions and advisors to receive certain
compensation (like commissions) that would otherwise be prohibited, provided they
contractually commit to a "best interest" standard of care and disclose conflicts of interest.
8. What is the primary difference between a 3(21) and a 3(38) fiduciary?
- A) A 3(21) is a non-fiduciary, while a 3(38) is a fiduciary.
- B) A 3(21) provides non-discretionary advice, while a 3(38) has discretionary authority over
investments.
- C) A 3(21) is responsible for plan administration, while a 3(38) is responsible for plan
investments.
- D) There is no difference; they are the same.
Answer: B
correct answers 2026
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Module 1: Fiduciary Roles and Responsibilities (Questions 1–25)
1. Which of the following is an example of the ERISA "Exclusive Purpose Rule"?
- A) Investing plan assets in a high-growth fund that charges a significant fee.
- B) Selecting an investment fund because it benefits the plan sponsor's cousin who works at the
fund.
- C) Using a portion of plan assets to pay a plan service provider.
- D) Hiring a family member as a plan advisor to save on costs.
Answer: C
Rationale: The Exclusive Purpose Rule requires fiduciaries to act solely in the interest of plan
participants and beneficiaries. Using plan assets to pay for necessary, reasonable plan expenses
(like service providers) is permissible, as it benefits the plan's operation. Options B and D are
prohibited transactions due to self-dealing. Option A is not inherently a violation, but the duty
of prudence requires that the fee be reasonable.
2. Under the "Prudence Rule," what must a fiduciary demonstrate when selecting a plan
investment?
- A) The investment will outperform the market every year.
- B) They have followed a process to investigate the investment and its role in the portfolio.
- C) The investment has no fees associated with it.
,- D) A majority of plan participants voted for the investment.
Answer: B
Rationale: The Prudence Rule is a process-oriented standard. It does not require perfect
outcomes. Instead, a fiduciary must act "with the care, skill, prudence, and diligence" that a
prudent person would use. This means conducting a thorough investigation, comparing
alternatives, and documenting the decision-making process.
3. Which of the following best describes a "Named Fiduciary"?
- A) Anyone who gives investment advice to the plan.
- B) The individual or entity identified in the plan document with fiduciary authority and control.
- C) The third-party administrator (TPA) who processes daily plan transactions.
- D) All plan participants over a certain age.
Answer: B
Rationale: The plan document must name at least one fiduciary (the "Named Fiduciary") who
has ultimate authority over the plan's management and control. This person or entity can
delegate certain responsibilities to other fiduciaries.
4. A plan advisor recommends a specific fund to a plan sponsor. The advisor also provides a
detailed analysis of the fund's fees, performance, and risks. What is this considered?
- A) A prohibited transaction.
- B) Investment advice, creating a fiduciary relationship.
- C) Investment education, which does not create a fiduciary relationship.
- D) A ministerial act.
,Answer: B
Rationale: According to the DOL, providing a recommendation on a specific investment to a plan
or participant can be considered "investment advice," thereby making the advisor a fiduciary
under ERISA. Providing general educational information (e.g., asset allocation models) is not
considered advice.
5. Which type of fiduciary is hired to have discretionary authority over the plan's investment
decisions, including selecting and monitoring investment options?
- A) 3(16) Administrator
- B) 3(21) Investment Advisor
- C) 3(38) Investment Manager
- D) Non-fiduciary service provider
Answer: C
Rationale: A 3(38) Investment Manager is a fiduciary that accepts full discretionary authority for
the plan's investments. This shifts a significant amount of liability away from the plan sponsor. A
3(21) advisor provides non-discretionary advice, while a 3(16) Administrator handles
administrative tasks.
6. Which of the following actions is most likely to establish a person as a plan fiduciary?
- A) Exercising discretionary authority or control over plan management.
- B) Processing a participant's distribution request.
- C) Preparing a quarterly investment performance report.
- D) Recording contributions into participant accounts.
Answer: A
, Rationale: Under ERISA, a person is a fiduciary to the extent they exercise any discretionary
authority or control over the plan's management or assets, or render investment advice for a
fee. Ministerial tasks like processing distributions or recording contributions are not considered
fiduciary acts.
7. The "Best Interest Contract Exemption" (BICE) was designed to allow what?
- A) Advisors to receive prohibited compensation as long as they adhere to a "best interest"
standard.
- B) Plan sponsors to avoid all fiduciary responsibilities.
- C) Plan participants to self-direct their own investments without any oversight.
- D) TPAs to perform discretionary plan management.
Answer: A
Rationale: The DOL's BICE allowed financial institutions and advisors to receive certain
compensation (like commissions) that would otherwise be prohibited, provided they
contractually commit to a "best interest" standard of care and disclose conflicts of interest.
8. What is the primary difference between a 3(21) and a 3(38) fiduciary?
- A) A 3(21) is a non-fiduciary, while a 3(38) is a fiduciary.
- B) A 3(21) provides non-discretionary advice, while a 3(38) has discretionary authority over
investments.
- C) A 3(21) is responsible for plan administration, while a 3(38) is responsible for plan
investments.
- D) There is no difference; they are the same.
Answer: B
