CPFA Exam Realistic Questions and Correct Answers With Complete
Solutions.
Under the DOL regulation, many advisors to retirement plans and their participants will be -
ANSWER: 3(21) fiduciaries. They will act alongside other fiduciary service providers who are
also not necessarily named in the plan document but who exercise discretionary control
over plan provisions or plan investments.
The advisor should educate the - ANSWER: plan sponsor about hiring fiduciary service
providers, including the different roles service providers, including the different roles service
providers may take on within the plan, how to select a qualified candidate, and the plan
sponsor's ongoing responsibility to monitor them.
The fiduciary definition has two parts: - ANSWER: who is a fiduciary
to what extent the person is a fiduciary
Clarifying fiduciary status is arguably incomplete without addressing both.
A best practice for a service provider's formal description of services might therefore include
two parts: - ANSWER: a. an acknowledgment of fiduciary status
b. clarification as to the extent of responsibilities
As a non-fiduciary advisor, you can - ANSWER: educate your client and present possible
investments for the Retirement Plan Committee consideration.
If you recommend a specific fund replacement to the plan sponsor or plan participants, you
are considered to be - ANSWER: giving investment advice and are therefore a functional
fiduciary to the plan.
If fiduciaries of participants use your recommendations - as opposed to information - to
make investment decisions, this could be considered - ANSWER: a fiduciary act
As a non-fiduciary advisor, you can meet with your client on a recurring basis (quarterly,
annually, etc) if providing - ANSWER: general investment reports or discussing the
appropriateness of the investments to the plan without making specific investment
suggestions.
Plan fiduciaries will almost always have to hire - ANSWER: service providers for their plan
under their ERISA "duty to obtain expert assistance."
As a best practice, the advisor can help fiduciaries select: - ANSWER: the service providers,
which usually includes a TPA and a record keeper.
In owner driven smaller plans, the advisor can assist the - ANSWER: plan sponsor's HR staff -
which is likely to be one person in working with the various plan service providers.
,In larger participant driven plans, the advisor can work with - ANSWER: the HR director,
CFO, and the retirement plan committee to evaluate service providers.
A 3(21) fiduciary does not serve as a fiduciary investment manager, but instead usually as -
ANSWER: investment advice fiduciary
f your client wants an advisor to manager plan investments, or just the QDIA, they can hire a
- ANSWER: 3(38) fiduciary advisor.
A 3(21) fiduciary advisors can recommend investments but the final decision on which
investments to choose is up to the - ANSWER: plan fiduciaries.
A 3(16) plan administrator can take on administrative duties for the plan but does not act in
- ANSWER: an investment capacity.
A non-fiduciary advisors can provide - ANSWER: education
The DOL is not required to be notified if - ANSWER: the plan hires a 3(21) advisor.
The fiduciaries should do a review of the service provider qualifications in order to prove a -
ANSWER: prudent process was not followed when selecting the service provider. They
should also review the service agreement, document the decision process, and have a
service agreement with the 3(21) advisor.
A 3(21) advisor fiduciary is considered a - ANSWER: fiduciary to the plan, but different than
advisors working as 3(38) fiduciaries, it is rarely named in the plan document.
The service agreement between the plan sponsor and the TPA is what determines if -
ANSWER: a TPA will work as a 3(16) fiduciary Plan Administrator.
ERISA 3(16) fiduciaries serve as the - ANSWER: "Plan Administrator" and are responsible for
administrative responsibilities in the plan. These include assuring the plan operation
remains in compliance with the plan document, providing administrative and compliance
documents for the fiduciary file and assuring that employee notices are drafted and
distributed.
ERISA 3(21) and 3(38) fiduciaries serve as - ANSWER: investment fiduciaries and their main
duty under ERISA is to provide investment advice.
3(38) fiduciaries may also serve as the - ANSWER: named investment manager for the plan,
and unlike 3(21) investment advice fiduciaries, will have discretionary control over plan
investments.
Employee education through enrollment meetings is performed by - ANSWER: retirement
plan advisors, including non-fiduciary, 3(21), and 3(38) fiduciary advisors. Assisting with
, fiduciary file documentation is another function that all retirement plan advisors, both
fiduciary and non-fiduciary are likely to perform.
As the advisor, you can assist the plan sponsor by - ANSWER: by asking about documents he
or she may be missing from the fiduciary file.
For example:
Are there any plan amendments?
Does he or she have copies of the required participant notices (including participant fee
disclosure) and account statements?
Where are the 408(b)(2) fee disclosure notices?
Does he or she have evidence that looked at the fee disclosure to determine if plan fees are
reasonable?
You can also assist the plan sponsor in identifying the - ANSWER: plan service providers who
may have copies of these documents, and assist him in setting up a fiduciary file.
You may also want to show the sponsor a - ANSWER: sample DOL investigation letter, so he
is aware of what the DOL might ask in advance of an investigation. You can point out that
unsigned documents or amendments and/or missing and incomplete plan documentation
may put him at risk in an audit.
You should assure the that Plan Sponsor is aware of - ANSWER: both your role as an
investment fiduciary regulations and what documentation she may need to review based on
specific financial institution requirements.
The advisor or the CPA is not responsible for - ANSWER: the required plan amendments.
The TPA or ERISA counsel can prepare the required amendment.
The plan docs need to be amended when - ANSWER: there is a law change that impacts the
plan, or when the fiduciaries are changing the plan provisions.
It is the fiduciaries' responsibility to - ANSWER: distribute fee disclosures notices, the record
keeper is the one who prepares them.
The plan document, IPS, and SPD are only required to be updated if - ANSWER: changes
have been made by the plan fiduciaries or law changes require a plan amendment and
changes to the SPD.
Fiduciaries have personal liability for - ANSWER: a "breach" of their duties.
It is important to remind the fiduciaries that an investment involving a party in interest is
prohibited even if - ANSWER: it has been beneficial to the plan participants and
beneficiaries. The prohibited transaction still must be corrected.
Correcting prohibited transactions may or may not be done through - ANSWER: the DOL
Voluntary Fiduciary Corrections Program (VFCP). Regardless, it is not the advisor's role to
correct prohibited transactions. Fiduciaries should consult an ERISA attorney to identified
Solutions.
Under the DOL regulation, many advisors to retirement plans and their participants will be -
ANSWER: 3(21) fiduciaries. They will act alongside other fiduciary service providers who are
also not necessarily named in the plan document but who exercise discretionary control
over plan provisions or plan investments.
The advisor should educate the - ANSWER: plan sponsor about hiring fiduciary service
providers, including the different roles service providers, including the different roles service
providers may take on within the plan, how to select a qualified candidate, and the plan
sponsor's ongoing responsibility to monitor them.
The fiduciary definition has two parts: - ANSWER: who is a fiduciary
to what extent the person is a fiduciary
Clarifying fiduciary status is arguably incomplete without addressing both.
A best practice for a service provider's formal description of services might therefore include
two parts: - ANSWER: a. an acknowledgment of fiduciary status
b. clarification as to the extent of responsibilities
As a non-fiduciary advisor, you can - ANSWER: educate your client and present possible
investments for the Retirement Plan Committee consideration.
If you recommend a specific fund replacement to the plan sponsor or plan participants, you
are considered to be - ANSWER: giving investment advice and are therefore a functional
fiduciary to the plan.
If fiduciaries of participants use your recommendations - as opposed to information - to
make investment decisions, this could be considered - ANSWER: a fiduciary act
As a non-fiduciary advisor, you can meet with your client on a recurring basis (quarterly,
annually, etc) if providing - ANSWER: general investment reports or discussing the
appropriateness of the investments to the plan without making specific investment
suggestions.
Plan fiduciaries will almost always have to hire - ANSWER: service providers for their plan
under their ERISA "duty to obtain expert assistance."
As a best practice, the advisor can help fiduciaries select: - ANSWER: the service providers,
which usually includes a TPA and a record keeper.
In owner driven smaller plans, the advisor can assist the - ANSWER: plan sponsor's HR staff -
which is likely to be one person in working with the various plan service providers.
,In larger participant driven plans, the advisor can work with - ANSWER: the HR director,
CFO, and the retirement plan committee to evaluate service providers.
A 3(21) fiduciary does not serve as a fiduciary investment manager, but instead usually as -
ANSWER: investment advice fiduciary
f your client wants an advisor to manager plan investments, or just the QDIA, they can hire a
- ANSWER: 3(38) fiduciary advisor.
A 3(21) fiduciary advisors can recommend investments but the final decision on which
investments to choose is up to the - ANSWER: plan fiduciaries.
A 3(16) plan administrator can take on administrative duties for the plan but does not act in
- ANSWER: an investment capacity.
A non-fiduciary advisors can provide - ANSWER: education
The DOL is not required to be notified if - ANSWER: the plan hires a 3(21) advisor.
The fiduciaries should do a review of the service provider qualifications in order to prove a -
ANSWER: prudent process was not followed when selecting the service provider. They
should also review the service agreement, document the decision process, and have a
service agreement with the 3(21) advisor.
A 3(21) advisor fiduciary is considered a - ANSWER: fiduciary to the plan, but different than
advisors working as 3(38) fiduciaries, it is rarely named in the plan document.
The service agreement between the plan sponsor and the TPA is what determines if -
ANSWER: a TPA will work as a 3(16) fiduciary Plan Administrator.
ERISA 3(16) fiduciaries serve as the - ANSWER: "Plan Administrator" and are responsible for
administrative responsibilities in the plan. These include assuring the plan operation
remains in compliance with the plan document, providing administrative and compliance
documents for the fiduciary file and assuring that employee notices are drafted and
distributed.
ERISA 3(21) and 3(38) fiduciaries serve as - ANSWER: investment fiduciaries and their main
duty under ERISA is to provide investment advice.
3(38) fiduciaries may also serve as the - ANSWER: named investment manager for the plan,
and unlike 3(21) investment advice fiduciaries, will have discretionary control over plan
investments.
Employee education through enrollment meetings is performed by - ANSWER: retirement
plan advisors, including non-fiduciary, 3(21), and 3(38) fiduciary advisors. Assisting with
, fiduciary file documentation is another function that all retirement plan advisors, both
fiduciary and non-fiduciary are likely to perform.
As the advisor, you can assist the plan sponsor by - ANSWER: by asking about documents he
or she may be missing from the fiduciary file.
For example:
Are there any plan amendments?
Does he or she have copies of the required participant notices (including participant fee
disclosure) and account statements?
Where are the 408(b)(2) fee disclosure notices?
Does he or she have evidence that looked at the fee disclosure to determine if plan fees are
reasonable?
You can also assist the plan sponsor in identifying the - ANSWER: plan service providers who
may have copies of these documents, and assist him in setting up a fiduciary file.
You may also want to show the sponsor a - ANSWER: sample DOL investigation letter, so he
is aware of what the DOL might ask in advance of an investigation. You can point out that
unsigned documents or amendments and/or missing and incomplete plan documentation
may put him at risk in an audit.
You should assure the that Plan Sponsor is aware of - ANSWER: both your role as an
investment fiduciary regulations and what documentation she may need to review based on
specific financial institution requirements.
The advisor or the CPA is not responsible for - ANSWER: the required plan amendments.
The TPA or ERISA counsel can prepare the required amendment.
The plan docs need to be amended when - ANSWER: there is a law change that impacts the
plan, or when the fiduciaries are changing the plan provisions.
It is the fiduciaries' responsibility to - ANSWER: distribute fee disclosures notices, the record
keeper is the one who prepares them.
The plan document, IPS, and SPD are only required to be updated if - ANSWER: changes
have been made by the plan fiduciaries or law changes require a plan amendment and
changes to the SPD.
Fiduciaries have personal liability for - ANSWER: a "breach" of their duties.
It is important to remind the fiduciaries that an investment involving a party in interest is
prohibited even if - ANSWER: it has been beneficial to the plan participants and
beneficiaries. The prohibited transaction still must be corrected.
Correcting prohibited transactions may or may not be done through - ANSWER: the DOL
Voluntary Fiduciary Corrections Program (VFCP). Regardless, it is not the advisor's role to
correct prohibited transactions. Fiduciaries should consult an ERISA attorney to identified
