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CPFA LICENSE CERTIFICATION ACTUAL EXAM
PREP 2026 ALL QUESTIONS AND CORRECT
DETAILED ANSWERS WITH RATIONALES ALREADY
A GRADED WITH EXPERT FEEDBACK |NEW AND
REVISED
1. Under ERISA, which of the following best defines the "prudent
expert" standard for fiduciaries?
A. A fiduciary must act as a layperson with ordinary business sense
B. A fiduciary must act with the care, skill, and caution that a
prudent person would use, assuming the fiduciary possesses
expertise in the subject matter
C. A fiduciary must guarantee investment returns
D. A fiduciary must follow the plan sponsor's instructions without
question
Rationale: The "prudent expert" rule requires fiduciaries to act with
the care, skill, and caution that a prudent person would use, assuming
the fiduciary has expertise in the area of decision-making. This is a
higher standard than the "prudent person" standard because it
assumes the fiduciary has specialized knowledge.
2. Which duty requires a fiduciary to place the interests of plan
participants above the fiduciary's own interests?
A. Duty of diversification
B. Duty of loyalty
C. Duty of prudence
D. Duty of disclosure
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Rationale: The duty of loyalty obligates fiduciaries to act solely in the
best interests of participants and beneficiaries, avoiding self-dealing or
conflicts of interest. This is one of the four basic fiduciary standards
under ERISA.
3. A "named fiduciary" under ERISA is:
A. Any person who performs a fiduciary function, regardless of title
B. An individual explicitly listed in the plan document as a fiduciary
C. A service provider who offers investment advice but has no decision-
making authority
D. The plan sponsor's CFO
Rationale: A named fiduciary is explicitly identified in the written plan
document as having authority to control and manage the plan's
operation and administration. This is a formal designation required by
ERISA.
4. What are the three primary sets of rules that serve as the foundation
for fiduciary responsibility under ERISA?
A. Diversification, delegation, documentation
B. Exclusive Purpose Rule, Fiduciary Standard of Care, Prohibited
Transactions Rule
C. Loyalty, disclosure, due diligence
D. Investment Policy Statement, Form 5500, Summary Plan Description
Rationale: The three foundational rules of fiduciary responsibility are:
(1) Exclusive Purpose Rule, (2) Fiduciary Standard of Care
(prudence), and (3) Prohibited Transactions Rule.
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5. Which of the following are the four basic fiduciary standards under
ERISA? (Select all that apply)
A. Loyalty
B. Maximum returns
C. Prudence
D. Diversification
E. Following the plan's governing documents
Rationale: The four basic fiduciary standards are: loyalty (exclusive
purpose rule), prudence, diversification, and following the plan's
governing documents to the extent not contrary to ERISA.
6. Fiduciary functions are those that involve which two things?
A. Investment returns and participant satisfaction
B. Control (or management of plan assets) and administration
(discretionary authority over plan operations)
C. Plan design and employee communication
D. Tax compliance and document maintenance
Rationale: Fiduciary functions involve control or management of plan
assets and discretionary authority over plan operations. A person
becomes a fiduciary by exercising discretionary authority or control
over plan management or assets.
7. According to ERISA §404(a)(1), fiduciaries must discharge their
duties:
A. Solely in the interest of the plan sponsor
B. Solely in the interest of participants and beneficiaries
C. For the benefit of the plan sponsor's shareholders
D. For the benefit of the service providers
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Rationale: ERISA requires fiduciaries to discharge their duties solely
in the interest of plan participants and beneficiaries, and for the
exclusive purpose of providing benefits to them and defraying
reasonable administrative expenses. This is the "exclusive purpose
rule" or "duty of loyalty".
8. Which of the following is considered a ministerial function performed
by a non-fiduciary service provider?
A. Selecting plan investments
B. Processing participant enrollment forms
C. Developing the Investment Policy Statement
D. Monitoring investment performance
Rationale: Ministerial functions are administrative tasks that do not
require fiduciary discretion, such as processing enrollment forms,
calculating benefits, and distributing plan documents. Fiduciary
functions involve discretionary authority or control over plan assets or
operations.
9. A person becomes a fiduciary under ERISA by:
A. Being named in the plan document only
B. Being appointed by the plan sponsor
C. Exercising discretionary authority or control over plan
management or assets
D. Receiving compensation for plan-related services
Rationale: Under ERISA Section 3(21), a person is a fiduciary to the
extent they exercise any discretionary authority or control over plan
management or assets, or render investment advice for a fee.
Fiduciary status is determined by function, not just title.
CPFA LICENSE CERTIFICATION ACTUAL EXAM
PREP 2026 ALL QUESTIONS AND CORRECT
DETAILED ANSWERS WITH RATIONALES ALREADY
A GRADED WITH EXPERT FEEDBACK |NEW AND
REVISED
1. Under ERISA, which of the following best defines the "prudent
expert" standard for fiduciaries?
A. A fiduciary must act as a layperson with ordinary business sense
B. A fiduciary must act with the care, skill, and caution that a
prudent person would use, assuming the fiduciary possesses
expertise in the subject matter
C. A fiduciary must guarantee investment returns
D. A fiduciary must follow the plan sponsor's instructions without
question
Rationale: The "prudent expert" rule requires fiduciaries to act with
the care, skill, and caution that a prudent person would use, assuming
the fiduciary has expertise in the area of decision-making. This is a
higher standard than the "prudent person" standard because it
assumes the fiduciary has specialized knowledge.
2. Which duty requires a fiduciary to place the interests of plan
participants above the fiduciary's own interests?
A. Duty of diversification
B. Duty of loyalty
C. Duty of prudence
D. Duty of disclosure
,2|Page
Rationale: The duty of loyalty obligates fiduciaries to act solely in the
best interests of participants and beneficiaries, avoiding self-dealing or
conflicts of interest. This is one of the four basic fiduciary standards
under ERISA.
3. A "named fiduciary" under ERISA is:
A. Any person who performs a fiduciary function, regardless of title
B. An individual explicitly listed in the plan document as a fiduciary
C. A service provider who offers investment advice but has no decision-
making authority
D. The plan sponsor's CFO
Rationale: A named fiduciary is explicitly identified in the written plan
document as having authority to control and manage the plan's
operation and administration. This is a formal designation required by
ERISA.
4. What are the three primary sets of rules that serve as the foundation
for fiduciary responsibility under ERISA?
A. Diversification, delegation, documentation
B. Exclusive Purpose Rule, Fiduciary Standard of Care, Prohibited
Transactions Rule
C. Loyalty, disclosure, due diligence
D. Investment Policy Statement, Form 5500, Summary Plan Description
Rationale: The three foundational rules of fiduciary responsibility are:
(1) Exclusive Purpose Rule, (2) Fiduciary Standard of Care
(prudence), and (3) Prohibited Transactions Rule.
,3|Page
5. Which of the following are the four basic fiduciary standards under
ERISA? (Select all that apply)
A. Loyalty
B. Maximum returns
C. Prudence
D. Diversification
E. Following the plan's governing documents
Rationale: The four basic fiduciary standards are: loyalty (exclusive
purpose rule), prudence, diversification, and following the plan's
governing documents to the extent not contrary to ERISA.
6. Fiduciary functions are those that involve which two things?
A. Investment returns and participant satisfaction
B. Control (or management of plan assets) and administration
(discretionary authority over plan operations)
C. Plan design and employee communication
D. Tax compliance and document maintenance
Rationale: Fiduciary functions involve control or management of plan
assets and discretionary authority over plan operations. A person
becomes a fiduciary by exercising discretionary authority or control
over plan management or assets.
7. According to ERISA §404(a)(1), fiduciaries must discharge their
duties:
A. Solely in the interest of the plan sponsor
B. Solely in the interest of participants and beneficiaries
C. For the benefit of the plan sponsor's shareholders
D. For the benefit of the service providers
, 4|Page
Rationale: ERISA requires fiduciaries to discharge their duties solely
in the interest of plan participants and beneficiaries, and for the
exclusive purpose of providing benefits to them and defraying
reasonable administrative expenses. This is the "exclusive purpose
rule" or "duty of loyalty".
8. Which of the following is considered a ministerial function performed
by a non-fiduciary service provider?
A. Selecting plan investments
B. Processing participant enrollment forms
C. Developing the Investment Policy Statement
D. Monitoring investment performance
Rationale: Ministerial functions are administrative tasks that do not
require fiduciary discretion, such as processing enrollment forms,
calculating benefits, and distributing plan documents. Fiduciary
functions involve discretionary authority or control over plan assets or
operations.
9. A person becomes a fiduciary under ERISA by:
A. Being named in the plan document only
B. Being appointed by the plan sponsor
C. Exercising discretionary authority or control over plan
management or assets
D. Receiving compensation for plan-related services
Rationale: Under ERISA Section 3(21), a person is a fiduciary to the
extent they exercise any discretionary authority or control over plan
management or assets, or render investment advice for a fee.
Fiduciary status is determined by function, not just title.
