NAPA CPFA® CertiFiCAtioN exAm QuestioNs ANd ANswers
PrACtiCe QuestioNs with solutioNs Newest 2026/2027 |
AlreAdy GrAded A+
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
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.
Identify named fiduciaries - ANSWER-Persons or entities specifically
named in the plan document
Explain roles and responsibilities of named fiduciaries - ANSWER-Discretionary authority over
management or the
administration of the plan
Identify actions covered by the Best Interest Contract Exemption - ANSWER-Acknowledge
fiduciary status for itself and its financial advisers;
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.
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.
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.
Differentiate between 3(16), 3(21) and 3(38) fiduciaries - ANSWER-3(16): • Ensure plan operates in
accordance with ERISA
• 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
3(21) - ANSWER-3(21): - Represents or acknowledges fiduciary status
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
3(38) - ANSWER-3(38):Has authority to make all investment changes
Discretion to manage, buy, or sell plan assets
(pooled accounts)
Manager of "managed accounts"
Broker/dealers and brokers cannot be an
Investment Manager
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
Identify required and additional documentation for maintaining plan records according to
fiduciary best practice - ANSWER-Required: • Current, SIGNED plan
document/amendments and SPD
• 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
PrACtiCe QuestioNs with solutioNs Newest 2026/2027 |
AlreAdy GrAded A+
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
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.
Identify named fiduciaries - ANSWER-Persons or entities specifically
named in the plan document
Explain roles and responsibilities of named fiduciaries - ANSWER-Discretionary authority over
management or the
administration of the plan
Identify actions covered by the Best Interest Contract Exemption - ANSWER-Acknowledge
fiduciary status for itself and its financial advisers;
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.
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.
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.
Differentiate between 3(16), 3(21) and 3(38) fiduciaries - ANSWER-3(16): • Ensure plan operates in
accordance with ERISA
• 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
3(21) - ANSWER-3(21): - Represents or acknowledges fiduciary status
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
3(38) - ANSWER-3(38):Has authority to make all investment changes
Discretion to manage, buy, or sell plan assets
(pooled accounts)
Manager of "managed accounts"
Broker/dealers and brokers cannot be an
Investment Manager
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
Identify required and additional documentation for maintaining plan records according to
fiduciary best practice - ANSWER-Required: • Current, SIGNED plan
document/amendments and SPD
• 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
