CPFA Exam - Questions With Fully Explained
Solutions
Primary duty of a fiduciary under ERISA Correct Answer - Act
solely in the interest of plan participants and beneficiaries
NOT a prohibited transaction under ERISA Correct Answer -
Offering participants a diversified range of investment options
Type of fiduciary with authority to make investment decisions
Correct Answer - 3(38) fiduciary
Primary advantage of using a Qualified Default Investment
Alternative (QDIA) Correct Answer - It reduces the plan
sponsor's fiduciary liability for default investments.
Feature of a Safe Harbor 401(k) plan Correct Answer -
Employer contributions that are immediately vested
Type of fund that automatically adjusts its asset allocation Correct
Answer - Target-date fund
Purpose of ADP/ACP testing Correct Answer - To verify that
highly compensated employees (HCEs) do not disproportionately
benefit from the plan
IRS correction program allowing employers to correct plan errors
without IRS approval Correct Answer - Self-Correction
Program (SCP)
Maximum allowable contribution for a participant in a 401(k) plan
for 2024 Correct Answer - $22,500
, Effective strategy for increasing plan participation rates Correct
Answer - Offering automatic enrollment with a default
contribution rate
Importance of financial wellness education for retirement plan
participants Correct Answer - It helps participants understand
the impact of saving and investing decisions on their retirement
readiness.
Practice considered a breach of fiduciary duty Correct Answer -
Failing to monitor plan investments periodically
Primary purpose of a fiduciary's duty of loyalty Correct Answer -
To act in the sole interest of plan participants and beneficiaries
Prudent man standard of care under ERISA Correct Answer -
Acting with the care, skill, prudence, and diligence of a prudent
person in similar circumstances
Party in interest under ERISA Correct Answer - Fiduciaries,
service providers, employers, and relatives of fiduciaries
Required action of a fiduciary to minimize liability Correct Answer
- Regularly reviewing plan service providers and fees
Primary advantage of adopting a Roth 401(k) feature Correct
Answer - Participants can make after-tax contributions with tax-
free qualified distributions.
Defined contribution (DC) plan Correct Answer - Allows
participants to manage their contributions and investment
allocations
Solutions
Primary duty of a fiduciary under ERISA Correct Answer - Act
solely in the interest of plan participants and beneficiaries
NOT a prohibited transaction under ERISA Correct Answer -
Offering participants a diversified range of investment options
Type of fiduciary with authority to make investment decisions
Correct Answer - 3(38) fiduciary
Primary advantage of using a Qualified Default Investment
Alternative (QDIA) Correct Answer - It reduces the plan
sponsor's fiduciary liability for default investments.
Feature of a Safe Harbor 401(k) plan Correct Answer -
Employer contributions that are immediately vested
Type of fund that automatically adjusts its asset allocation Correct
Answer - Target-date fund
Purpose of ADP/ACP testing Correct Answer - To verify that
highly compensated employees (HCEs) do not disproportionately
benefit from the plan
IRS correction program allowing employers to correct plan errors
without IRS approval Correct Answer - Self-Correction
Program (SCP)
Maximum allowable contribution for a participant in a 401(k) plan
for 2024 Correct Answer - $22,500
, Effective strategy for increasing plan participation rates Correct
Answer - Offering automatic enrollment with a default
contribution rate
Importance of financial wellness education for retirement plan
participants Correct Answer - It helps participants understand
the impact of saving and investing decisions on their retirement
readiness.
Practice considered a breach of fiduciary duty Correct Answer -
Failing to monitor plan investments periodically
Primary purpose of a fiduciary's duty of loyalty Correct Answer -
To act in the sole interest of plan participants and beneficiaries
Prudent man standard of care under ERISA Correct Answer -
Acting with the care, skill, prudence, and diligence of a prudent
person in similar circumstances
Party in interest under ERISA Correct Answer - Fiduciaries,
service providers, employers, and relatives of fiduciaries
Required action of a fiduciary to minimize liability Correct Answer
- Regularly reviewing plan service providers and fees
Primary advantage of adopting a Roth 401(k) feature Correct
Answer - Participants can make after-tax contributions with tax-
free qualified distributions.
Defined contribution (DC) plan Correct Answer - Allows
participants to manage their contributions and investment
allocations
