NAPA CPFA CERTIFICATION
National Association of Plan Advisors — Certified Plan Fiduciary Advisor
Examination —Questions and Answers| Latest Update
1. Under ERISA, who is considered a fiduciary with respect to a retirement plan?
A. Only the named plan administrator listed in the plan document
B. Anyone who exercises discretionary authority or control over plan management,
administration, or assets
C. Only the recordkeeper hired by the plan sponsor
D. Only licensed investment advisors registered with the SEC
Correct Answer: B. Anyone who exercises discretionary authority or control over
plan management, administration, or assets
Rationale: ERISA defines fiduciary status functionally: anyone who exercises
discretionary authority or control over plan management or assets, renders
investment advice for a fee, or has discretionary responsibility for plan administration
is a fiduciary, regardless of title.
2. Which of the following is NOT one of the core fiduciary duties under ERISA Section
404(a)?
A. Duty of loyalty
B. Duty of prudence
C. Duty to diversify plan investments
D. Duty to guarantee investment returns
Correct Answer: D. Duty to guarantee investment returns
Rationale: ERISA imposes duties of loyalty, prudence, diversification, and adherence
to plan documents, but fiduciaries are never required to guarantee investment
performance; they are judged on process, not outcomes.
3. The 'duty of loyalty' under ERISA requires fiduciaries to act:
A. In the best interest of the plan sponsor's shareholders
B. Solely in the interest of plan participants and beneficiaries
C. In a manner that maximizes fiduciary compensation
D. According to the recordkeeper's recommendations
Correct Answer: B. Solely in the interest of plan participants and beneficiaries
Rationale: The duty of loyalty, often called the 'exclusive purpose rule,' requires
fiduciaries to act solely in the interest of participants and beneficiaries, for the
exclusive purpose of providing benefits and defraying reasonable plan expenses.
,4. What standard of care does ERISA impose on fiduciaries under the 'prudent expert'
rule?
A. The care of an ordinary reasonable person
B. The care, skill, prudence, and diligence that a prudent person familiar with such
matters would use
C. The lowest cost approach regardless of quality
D. No specific standard; fiduciaries have full discretion
Correct Answer: B. The care, skill, prudence, and diligence that a prudent person
familiar with such matters would use
Rationale: ERISA's prudent expert standard requires fiduciaries to act with the care,
skill, prudence, and diligence that a prudent person acting in a like capacity and
familiar with such matters would use, a higher bar than the common law 'prudent
man' rule.
5. Which entity enforces ERISA's fiduciary provisions and can bring civil actions against
breaching fiduciaries?
A. The Federal Reserve
B. The Department of Labor (DOL)
C. The Federal Trade Commission (FTC)
D. The Consumer Financial Protection Bureau (CFPB)
Correct Answer: B. The Department of Labor (DOL)
Rationale: The Department of Labor's Employee Benefits Security Administration
(EBSA) has primary enforcement authority over ERISA's fiduciary provisions, including
investigating breaches and bringing civil actions.
,6. Under ERISA Section 3(21), what constitutes 'investment advice' that triggers
fiduciary status?
A. Any general market commentary provided to a plan sponsor
B. Individualized advice regarding the value of securities or advisability of investing,
given on a regular basis, pursuant to a mutual agreement, that serves as a primary
basis for investment decisions
C. Advertising materials distributed to all plan sponsors
D. Only advice given in writing
Correct Answer: B. Individualized advice regarding the value of securities or
advisability of investing, given on a regular basis, pursuant to a mutual agreement,
that serves as a primary basis for investment decisions
Rationale: Under the functional test for investment advice fiduciary status, advice
must be individualized, given regularly, pursuant to a mutual understanding, and
serve as a primary basis for the plan's investment decisions.
7. What is the difference between a 3(21) fiduciary advisor and a 3(38) investment
manager?
A. There is no meaningful difference
B. A 3(21) advisor provides recommendations while the plan sponsor retains final
decision-making authority; a 3(38) manager has full discretionary authority to make
and implement investment decisions
C. A 3(38) manager only works with defined benefit plans
D. A 3(21) advisor cannot be held liable for advice given
Correct Answer: B. A 3(21) advisor provides recommendations while the plan
sponsor retains final decision-making authority; a 3(38) manager has full
discretionary authority to make and implement investment decisions
Rationale: A 3(21) fiduciary co-fiduciary provides investment recommendations, but
the plan sponsor retains ultimate decision-making authority and shared liability; a
3(38) investment manager assumes full discretionary control and corresponding
liability for investment selection.
, 8. Which of the following best describes a 'prohibited transaction' under ERISA?
A. Any transaction that loses money for the plan
B. A transaction between the plan and a party in interest that is generally barred
unless an exemption applies
C. Any transaction involving employer stock
D. A transaction that occurs outside of normal business hours
Correct Answer: B. A transaction between the plan and a party in interest that is
generally barred unless an exemption applies
Rationale: ERISA Section 406 prohibits certain transactions between a plan and
'parties in interest' (such as the sponsor, fiduciaries, or service providers) unless a
statutory or administrative exemption, such as PTE 84-14 or the ERISA 408(b)(2)
exemption for reasonable service arrangements, applies.
9. What is a 'party in interest' under ERISA?
A. Only the plan's outside legal counsel
B. Individuals or entities with certain relationships to the plan, such as fiduciaries,
service providers, the sponsor, and their affiliates
C. Only participants with account balances over $50,000
D. Only the plan's external auditor
Correct Answer: B. Individuals or entities with certain relationships to the plan,
such as fiduciaries, service providers, the sponsor, and their affiliates
Rationale: A party in interest includes plan fiduciaries, service providers, the
employer/sponsor, employee organizations, and persons with specified ownership or
family relationships to these parties, as defined in ERISA Section 3(14).
10. Which ERISA section provides a safe harbor for participant-directed individual
account plans, limiting fiduciary liability for investment losses resulting from
participant investment choices?
A. Section 401(k)
B. Section 404(c)
C. Section 409
D. Section 502
Correct Answer: B. Section 404(c)
Rationale: ERISA Section 404(c) provides fiduciary relief for losses resulting from a
participant's exercise of control over their account, provided the plan meets specific
requirements including offering a broad range of investment alternatives and
providing sufficient information.
National Association of Plan Advisors — Certified Plan Fiduciary Advisor
Examination —Questions and Answers| Latest Update
1. Under ERISA, who is considered a fiduciary with respect to a retirement plan?
A. Only the named plan administrator listed in the plan document
B. Anyone who exercises discretionary authority or control over plan management,
administration, or assets
C. Only the recordkeeper hired by the plan sponsor
D. Only licensed investment advisors registered with the SEC
Correct Answer: B. Anyone who exercises discretionary authority or control over
plan management, administration, or assets
Rationale: ERISA defines fiduciary status functionally: anyone who exercises
discretionary authority or control over plan management or assets, renders
investment advice for a fee, or has discretionary responsibility for plan administration
is a fiduciary, regardless of title.
2. Which of the following is NOT one of the core fiduciary duties under ERISA Section
404(a)?
A. Duty of loyalty
B. Duty of prudence
C. Duty to diversify plan investments
D. Duty to guarantee investment returns
Correct Answer: D. Duty to guarantee investment returns
Rationale: ERISA imposes duties of loyalty, prudence, diversification, and adherence
to plan documents, but fiduciaries are never required to guarantee investment
performance; they are judged on process, not outcomes.
3. The 'duty of loyalty' under ERISA requires fiduciaries to act:
A. In the best interest of the plan sponsor's shareholders
B. Solely in the interest of plan participants and beneficiaries
C. In a manner that maximizes fiduciary compensation
D. According to the recordkeeper's recommendations
Correct Answer: B. Solely in the interest of plan participants and beneficiaries
Rationale: The duty of loyalty, often called the 'exclusive purpose rule,' requires
fiduciaries to act solely in the interest of participants and beneficiaries, for the
exclusive purpose of providing benefits and defraying reasonable plan expenses.
,4. What standard of care does ERISA impose on fiduciaries under the 'prudent expert'
rule?
A. The care of an ordinary reasonable person
B. The care, skill, prudence, and diligence that a prudent person familiar with such
matters would use
C. The lowest cost approach regardless of quality
D. No specific standard; fiduciaries have full discretion
Correct Answer: B. The care, skill, prudence, and diligence that a prudent person
familiar with such matters would use
Rationale: ERISA's prudent expert standard requires fiduciaries to act with the care,
skill, prudence, and diligence that a prudent person acting in a like capacity and
familiar with such matters would use, a higher bar than the common law 'prudent
man' rule.
5. Which entity enforces ERISA's fiduciary provisions and can bring civil actions against
breaching fiduciaries?
A. The Federal Reserve
B. The Department of Labor (DOL)
C. The Federal Trade Commission (FTC)
D. The Consumer Financial Protection Bureau (CFPB)
Correct Answer: B. The Department of Labor (DOL)
Rationale: The Department of Labor's Employee Benefits Security Administration
(EBSA) has primary enforcement authority over ERISA's fiduciary provisions, including
investigating breaches and bringing civil actions.
,6. Under ERISA Section 3(21), what constitutes 'investment advice' that triggers
fiduciary status?
A. Any general market commentary provided to a plan sponsor
B. Individualized advice regarding the value of securities or advisability of investing,
given on a regular basis, pursuant to a mutual agreement, that serves as a primary
basis for investment decisions
C. Advertising materials distributed to all plan sponsors
D. Only advice given in writing
Correct Answer: B. Individualized advice regarding the value of securities or
advisability of investing, given on a regular basis, pursuant to a mutual agreement,
that serves as a primary basis for investment decisions
Rationale: Under the functional test for investment advice fiduciary status, advice
must be individualized, given regularly, pursuant to a mutual understanding, and
serve as a primary basis for the plan's investment decisions.
7. What is the difference between a 3(21) fiduciary advisor and a 3(38) investment
manager?
A. There is no meaningful difference
B. A 3(21) advisor provides recommendations while the plan sponsor retains final
decision-making authority; a 3(38) manager has full discretionary authority to make
and implement investment decisions
C. A 3(38) manager only works with defined benefit plans
D. A 3(21) advisor cannot be held liable for advice given
Correct Answer: B. A 3(21) advisor provides recommendations while the plan
sponsor retains final decision-making authority; a 3(38) manager has full
discretionary authority to make and implement investment decisions
Rationale: A 3(21) fiduciary co-fiduciary provides investment recommendations, but
the plan sponsor retains ultimate decision-making authority and shared liability; a
3(38) investment manager assumes full discretionary control and corresponding
liability for investment selection.
, 8. Which of the following best describes a 'prohibited transaction' under ERISA?
A. Any transaction that loses money for the plan
B. A transaction between the plan and a party in interest that is generally barred
unless an exemption applies
C. Any transaction involving employer stock
D. A transaction that occurs outside of normal business hours
Correct Answer: B. A transaction between the plan and a party in interest that is
generally barred unless an exemption applies
Rationale: ERISA Section 406 prohibits certain transactions between a plan and
'parties in interest' (such as the sponsor, fiduciaries, or service providers) unless a
statutory or administrative exemption, such as PTE 84-14 or the ERISA 408(b)(2)
exemption for reasonable service arrangements, applies.
9. What is a 'party in interest' under ERISA?
A. Only the plan's outside legal counsel
B. Individuals or entities with certain relationships to the plan, such as fiduciaries,
service providers, the sponsor, and their affiliates
C. Only participants with account balances over $50,000
D. Only the plan's external auditor
Correct Answer: B. Individuals or entities with certain relationships to the plan,
such as fiduciaries, service providers, the sponsor, and their affiliates
Rationale: A party in interest includes plan fiduciaries, service providers, the
employer/sponsor, employee organizations, and persons with specified ownership or
family relationships to these parties, as defined in ERISA Section 3(14).
10. Which ERISA section provides a safe harbor for participant-directed individual
account plans, limiting fiduciary liability for investment losses resulting from
participant investment choices?
A. Section 401(k)
B. Section 404(c)
C. Section 409
D. Section 502
Correct Answer: B. Section 404(c)
Rationale: ERISA Section 404(c) provides fiduciary relief for losses resulting from a
participant's exercise of control over their account, provided the plan meets specific
requirements including offering a broad range of investment alternatives and
providing sufficient information.
