NAPA CPFA Certification Exam 2026/2027 | Certified Plan Fiduciary Advisor | Verified Questions & Answers | Grade A

NAPA CPFA Certification Exam 2026/2027 | Certified Plan Fiduciary Advisor | Verified Questions & Answers | Grade A Q: 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 Q: 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. Q: Identify named fiduciaries Answer Persons or entities specifically named in the plan document Q: Explain roles and responsibilities of named fiduciaries Answer Discretionary authority over management or the administration of the plan Q: Identify actions covered by the Best Interest Contract Exemption Acknowledge fiduciary status for itself and its financial advisers; Answer 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. Q: 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. Q: Describe the "best interest contract exemption" under the DOL fiduciary regulation Answer The Best Interest Contract Exemption permits financial advisers (i.e., an individual who is a representative of an investment adviser, broker-dealer, insurance company, or bank or similar financial institution) and the financial institutions that employ them to continue to rely on many current compensation and fee practices, as long as they meet specific conditions intended to ensure that financial institutions mitigate conflicts of interest and that they, and their financial advisers, provide investment advice that is in the best interests of their customers. Q: Differentiate between 3(16), 3(21) and 3(38) fiduciaries 3(16): • Ensure plan operates in accordance with ERISA Answer • Ensure plan follows its terms • Provide participant notices/disclosures • Sign and file Form 5500 (Annual return) • Authorize distribution/loans • Select and monitor service providers • Ensure plan expenses are reasonable Q: 3(21) 3(21): - Represents or acknowledges fiduciary status Answer Renders the advice pursuant to a written or verbal agreement, arrangement, or understanding that the advice is based on the particular investment needs of the advice recipient, or Directs the advice to a specific advice recipient(s) regarding the advisability of a particular investment or management decision Usually advises plan sponsor or investment committee, but does not make decisions alone Q: 3(38) 3(38):Has authority to make all investment changes Answer Discretion to manage, buy, or sell plan assets (pooled accounts) Manager of "managed accounts" Broker/dealers and brokers cannot be an Investment Manager Q: Identify ministerial functions performed by non-fiduciary service providers Answer • Not exercising any discretionary control • Ministerial in nature • Day-to-day job of administering the plan • Eligibility • Calculation of benefits • Preparing Form 5500 Q: Identify required and additional documentation for maintaining plan records according to fiduciary best practice Required: • Current, SIGNED plan document/amendments and SPD Answer • IRS determination/opinion letter for plan document • Form 5500 • Fidelity bond • Contribution/loan deposit confirmation reports (timeliness of deposits) • 408(b)(2) and 404(a)(5) disclosures • Notices: Safe harbor, QDIA, blackout, etc. Additional: • Meeting minutes/agendas/how decisions were "prudently" made • Investment policy statement • Monitoring/benchmarking reports • Service provider agreements/contracts Q: Explain service provider role in assisting with prudent process documentation Answer actively participating in the decision-making process, providing detailed information about their services, performance metrics, and fees, allowing the plan fiduciary to thoroughly evaluate and document the rationale behind selecting a particular service provider, thus demonstrating a prudent approach to managing the plan and mitigating potential liability risks Q: Identify when plan documents should be updated Answer whenever there is a change in the plan itself, relevant laws or regulations, or at least every few years to ensure compliance, with most pre-approved plans requiring an update every six years to reflect legislative changes and maintain IRS approval Q: Identify parties-in-interest to the plan Answer • Employer, owners, officers, and certain relatives thereof • Plan participants • Fiduciaries, service providers (advisors, TPA, recordkeepers) Q: Identify Prohibited Transactions and possible fiduciary breach events PT: Any unauthorized transaction between a plan and a "party-in-interest" (unless there is a specific exemption) Answer • Sale, exchange, or lease of property • Lending of money or credit • Furnishing goods or services • Transfer or use of plan assets • Holding certain employer securities/real property Q: Breach = failure to fulfill any obligation under ERISA Answer • Prudence, loyalty, diversification, follow plan documents • Maintain a plan document • Provide information to participants • Government reporting Q: Identify possible consequences of Prohibited Transactions and fiduciary breach events Answer • Restore losses (make plan "whole") • Removal of fiduciary • Civil/criminal charges Q: Explain the DOL role in overseeing plans enforce the Employee Retirement Income Security Act (ERISA) and PT rules Oversees employee benefit plans Q: Explain how common problems can be corrected using DOL and IRS correction programs Answer Voluntary Fiduciary Correction Program (VFCP) • Late 401(k) contributions • Improper benefit payments •Improper/excessive fee payments • Improper payment of fees to a fiduciary • Improper loan to a party-in-interest • Asset purchase/sale to/from a party-in-interest Delinquent Filer Voluntary Compliance Program (DFVCP) Employee Plan Compliance Resolution System (EPCRS) Q: Analyze situations for possible Ethics issues under conflicts of interest Financial interests: Answer Owning stocks in a company that your organization is considering doing business with. Receiving personal gifts or benefits from vendors or clients. Investing in a competitor company while making decisions that could impact their market share. Family relationships: Answer Hiring or promoting a family member without a transparent selection process. Favoring a project or business deal where a family member is involved. Personal relationships: Answer Dating a colleague and making decisions that could benefit them. Giving preferential treatment to friends or close associates. Professional advancement: Answer Taking on extra work or responsibilities to curry favor with superiors. Withholding negative information about a colleague to maintain a positive relationship. Explain best practice for determining reasonableness of fees Answer • 408(b)(2) plan sponsor disclosure - Plan fees paid to service providers • 404(a)(5) participant disclosure - Fees paid out of participant accounts • Benchmarking fee reports -Helps determine value of services and Shows a prudent process is being followed and documented Classify expenses as payable and not payable by the plan assets expenses considered "administrative" or "fiduciary" are payable by plan assets, while "settlor" expenses, which are related to employer decisions about plan design or structure, are not payable by plan assets and should be paid by the employer Examples of Payable expenses Expenses payable by plan assets (administrative/fiduciary): Recordkeeping fees Investment and custodial fees Compliance testing costs Required reporting (Form 5500) Participant communications (required disclosures) Actuarial fees for plan administration Claims processing and benefit calculations Legal and consulting fees related to plan administration Example of non-payable expenses Expenses not payable by plan assets (settlor expenses): Plan design studies and projections Initial plan document creation Discretionary plan amendments Fees related to plan termination decisions Consulting fees regarding plan design changes Employer-driven communication campaigns not directly related to plan administration Identify main consequences of not documenting prudent process for reviewing fees and services 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 Compare and contrast a Fidelity bond and fiduciary insurance ERISA Fidelity Bond: Required by law, protects the PLAN ERISA Fidelity Bond: Required by law, protects the PLAN List considerations when formulating plan goals and objectives • 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? Identify Plan Sponsor's business structure and related entities Explain impact of family and related company ownership on plan design 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. 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. Types of controlled group relationships 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. Describe impact of cash flow and budget on plan design • May need to be treated as a SINGLE employer • One related company may need to make contributions to employees at another related company • All employees may be required to be eligible under the same plan • As the advisor, always have plan sponsor contact an experienced service provider or ERISA counsel Compare and contrast IRA-based plans to 401(k) plans SEP (Simplified Employee Pension): Similar to profit sharing, invested in IRAs Employer contributions only, 100% vested Compare and contrast IRA-based plans to 401(k) plans SIMPLE IRA: Similar to 401(k) Safe Harbor (but with lower annual limits) Employee and required employer contributions May not maintain a SIMPLE IRA and a qualified plan Compare and contrast IRA-based plans to 401(k) plans SIMPLE 401(k): Cross between SIMPLE IRA and a 401(k) Safe Harbor Employee and required employer contributions All the requirements of a 401(k) Plan but with lower limits Explain hybrid plan combinations combines elements of a traditional defined benefit (DB) pension plan and a defined contribution (DC) plan that is similar to a 401(k). Explain plan features Eligibility and Participation Compensation Contributions Vesting Distributions/Loans Summarize how plan features support plan goals and objectives Eligibility and participation: What employees are allowed/not allowed to participate Age/service requirements Compensation: Must be defined (ex. W-2), exclusions can be problematic Maximum limit (set by IRC) Contributions: 401(k), Roth, Match, SH, PS Vesting: Applies to employer contributions (match, profit- sharing) Usually based on years of service Not applicable to: 401(k), safe harbor, rollovers into plan Distributions/Loans Separation, death, disability, RMDs In-service, hardship, loans Explain which plan features are optional based on the plan design N/A Describe roles and responsibilities of the parties involved in creating plan documents based on plan design Advisors: Can be fiduciary or non-fiduciary Third Party Administrator (TPA): Testing, Form 5500, eligibility, contributions, notices Recordkeeper: Tracks account activity, provides account access, statements Independent CPA: Financial reports for plans over 100 participants Actuaries: Defined Benefit Plans ERISA Attorneys: Plan documents, amendments, corrections Explain the different components of an adoption agreement • Two parts: a "checklist" of plan provisions and a base plan document • Pre-approved plans are IRS approved • Prepared by TPAs and recordkeepers • Larger plans may use an ERISA attorney and an individually designed plan Identify required and optional amendments n/a Explain importance of successful participant outcomes to Plan Sponsor and participants n/a List considerations for Plan Sponsor to help create successful participant outcomes Participant Education "Stretch" Match Automatic Enrollment and/or Escalation Re-Enrollment Compare and contrast education approach and behavioral finance techniques N/A Explain re-enrollment process • Default to Target Date or Managed accounts • Results in age-appropriate asset allocation • Opt-out option Evaluate participant outcome by using gap analysis N/A Explain the roles of service providers Advisors: Can be fiduciary or non-fiduciary Third Party Administrator (TPA): Testing, Form 5500, eligibility, contributions, notices Recordkeeper: Tracks account activity, provides account access, statements Independent CPA: Financial reports for plans over 100 participants Actuaries: Defined Benefit Plans ERISA Attorneys: Plan documents, amendments, corrections Identify factors used to assist in service provider selection N/A Describe fiduciary prudent process for selecting service providers • Fiduciary best practice • Advisor can help compile a list of potential providers • Ability to review/compare different providers • Determine if providers/contracts meet goals of plan • Ability to determine if fees are reasonable • Fees paid for services provided • How paid (direct, indirect) Explain different types of service providers, including bundled and unbundled service models Bundled • One provider offers ALL (or more than one) services • Investment, recordkeeping, TPA, education • Cost usually expressed as a single fee Unbundled • Different providers for plan services • Separate TPA, recordkeeper, and advisor • Each provider charges a separate fee Describe the role of Plan Sponsors regarding required participant disclosures N/A Explain risk/return, asset classes and diversification of investments Risk/Return: N/A Diversification • Characteristics of different asset classes • How diversification reduces risk • Diversification allows different risk and retirement goals for participants Explain differences and similarities between investment options Mutual Funds Brokerage accounts Separate accounts Asset allocation funds (Target Date/ Risk) ETFs Alternative investments (Real estate, precious metals, collectibles) GICs and Stable value funds Collect Investment Funds (CIFs) Employer Stock Compare to/through target date funds • Single investment holding • Well-diversified • Professionally managed • Designed to be age (TDFs) or risk (TRFs) appropriate • TDFs (Target Date Funds) have a glide path (gets more conservative) • "To funds" (age 65) - "through funds" ( age 65) • TRFs (Target Risk Funds) retain their asset allocation • TDFs require oversight to ensure glide path and cost are Reasonable Explain Qualified Default Investment Alternative (QDIA) rules • Used when EE does not provide investment instructions • Provides fiduciary safe harbor relief (prudence) • TDFs, TRFs, Balanced funds, managed portfolio • QDIA notices are required • QDIAs are NOT required (best practice) Compare asset allocation fund models, including impact on participant outcomes N/A Compare active and passive management N/A Explain the impact of revenue sharing on fiduciary prudent process • Plan asset subject to ERISA rules of prudence • May be used to pay plan expenses • May be credited back to participants • Be aware of the amount of revenue sharing being generated Summarize the process of prudent investment selection • Diversification • Asset classes across a risk/return spectrum • Active/Passive management style • Use of Target Date/Risk funds • Are fees reasonable? • Revenue sharing • Do investments support plan goals? Explain fiduciary prudent process to create a broad-based IPS • Purpose of the IPS • Investment selection • Review and update IPS • Responsibilities of plan fiduciaries (committee, advisor) •Investment/Manager monitoring • Asset class guidelines • Investment expenses/fees • Proxy voting • Diversification • Asset classes across a risk/return spectrum • Active/Passive management style • Use of Target Date/Risk funds • Are fees reasonable? • Revenue sharing • Do investments support plan goals? Identify basic criteria and procedures to follow when selecting and replacing investment options • Outline process for selection/monitoring/replacement of investments • Selection criteria, monitoring software Identify parties responsible for maintaining the IPS n/a Describe fiduciary prudent process to change IPS according to best practices N/A Identify components of investment reviews n/a Recommend the frequency for performing investment reviews and/or plan committee meetings n/a Describe the importance of investment performance evaluation for a fiduciary prudent process n/a Determine when investment replacements are appropriate n/a Identify best practice documentation needed for documenting prudent process when monitoring plan investments n/a Explain daily activities required by plan sponsor staff while interacting with service providers n/a Identify most important actions to prevent most common errors 1) Know which errors are most common 2) Work with service providers to create a process 3) Create and use checklists 4) Read and review plan documents 5) Maintain a fiduciary file for all plan-related documents Identify the role of adviser related to the Retirement Plan Committee n/a Identify attributes of an effective Retirement Plan Committee n/a Explain the importance of meetings for fiduciary due diligence n/a Identify best practices for fiduciary training • Identify the plan's fiduciaries and non-fiduciary providers • How to document fiduciary decisions • Why read/follow plan documents • How to diversify investments/ minimize risk • Explain ERISA exclusive purpose/ standard of care rules • How to select/ monitor investments/ fees prudently Why adopt an IPS Describe the process for appointing and replacing fiduciaries N/A Identify conversion documentation as a plan management best practice N/A Identify conversion documents that are part of a plan management prudent process Decision to replace old provider Including reasons for inadequacy or complaints RFP (prudent process documents) Participant notices (Blackout, QDIA) New provider fee schedule - 408(b)(2) New provider service agreements New plan documents (adoption agreements) Common when there is a change in TPA or RK