CPFA Exam 2025–2026 Accurate Real Exam
Questions and Verified Correct Answers
JUST RELEASED
Contributions can have a major impact in - answer>>>supporting plan goals as well as
plan costs.
Advisors should be familiar with different contribution provisions and consider the
following when designing contribution provisions: - answer>>>1. Is there a philosophy on
making employer contributions?
2. Is the objective to maximize contributions to the principal employees?
3. What is the objective and budget for non-principal employees?
4. Is there one or more group of employees who may not need the plan or who are
unlikely to participate in the plan?
5. How important is it that your employees be on track for an adequate retirement
income?
6. What is the company's cash flow?
7. What is the approximate budget for plan contributions?
Vesting schedules add to a - answer>>>plan's administrative complexity for record
keepers and TPAs, and can add to the plan's cost. However, employers often consider
forfeitures advantageous for cost savings and therefore may prefer vesting schedules that
do not vest participants 100% immediately.
It is important to remind employers that not all their contributions are subject to -
answer>>>vesting, especially safe harbor contributions that are always 100% vested.
,Advisors should discuss loan and hardship withdrawal provisions with - answer>>>plan
sponsors and plan fiduciaries.
Because these provisions are optional, plans whose goal is for participants to save for
retirement do not have to offer them. However, many participants will not defer if they
believe they cannot get their money out until they retire or leave the company.
Loans and hardships have a track record of - answer>>>encouraging participation
Loan provisions in particular can be - answer>>>tailored to a plan's employee
demographics, offering one loan at a time, requiring payroll deduction repayment and/or
limiting loan amounts. Although these options increase costs for administration, fees are
charged to the participants taking the loan or the hardship withdrawal, so they don't
affect participants not taking loan or hardships.
In owner-driven plans, advisors should caution owners and partners to - answer>>>to
administer their loan programs for themselves, just as they do for the other plan
participants.
There are advantages to participants in allowing rollovers into the plan from another plan
or IRA: - answer>>>1. Participants can consolidate their retirement accounts.
2. Generally, investing in a 401k is more cost effective than investing in an IRA
3. Participants can take advantage of loans and hardship withdrawal provisions of the
qualified plan.
4. Participants have access to professionally managed 401k investments.
, Large companies may want to consider a - answer>>>traditional 401k with auto
enrollment and a matching contribution. Because of their large size, they are less likely to
consider a safe-harbor design.
Pros of traditional 401k: - answer>>>1. Elective deferrals allow employees to save on a
tax-preferred basis for retirement
2. Employer matching contributions reward employee savings
3. Automatic enrollment designs create better participant outcomes
4. Roth 401(k) deferrals allow for tax-free savings
5. Catch up contributions allow additional savings for employees 50 and older
6. Safe harbor contributions can exempt a plan from nondiscrimination testing
7. Employees can select investments individualized to their needs
8. Designs can be flexible enough to allow for both principal and non-principal savings
benefits
Cons of traditional 401k: - answer>>>1. Complex to administer and design; multiple
contribution sources make record-keeping complicated
2. Safe harbor contributions are fixed not flexible
3. Matching contributions can also be a fixed contribution commitment
4. Subject to ADP/ACP testing, unless the plan uses a safe harbor design
SEP or SIMPLE plans are attractive to start up firms because - answer>>>they are less
expensive to administer.
Questions and Verified Correct Answers
JUST RELEASED
Contributions can have a major impact in - answer>>>supporting plan goals as well as
plan costs.
Advisors should be familiar with different contribution provisions and consider the
following when designing contribution provisions: - answer>>>1. Is there a philosophy on
making employer contributions?
2. Is the objective to maximize contributions to the principal employees?
3. What is the objective and budget for non-principal employees?
4. Is there one or more group of employees who may not need the plan or who are
unlikely to participate in the plan?
5. How important is it that your employees be on track for an adequate retirement
income?
6. What is the company's cash flow?
7. What is the approximate budget for plan contributions?
Vesting schedules add to a - answer>>>plan's administrative complexity for record
keepers and TPAs, and can add to the plan's cost. However, employers often consider
forfeitures advantageous for cost savings and therefore may prefer vesting schedules that
do not vest participants 100% immediately.
It is important to remind employers that not all their contributions are subject to -
answer>>>vesting, especially safe harbor contributions that are always 100% vested.
,Advisors should discuss loan and hardship withdrawal provisions with - answer>>>plan
sponsors and plan fiduciaries.
Because these provisions are optional, plans whose goal is for participants to save for
retirement do not have to offer them. However, many participants will not defer if they
believe they cannot get their money out until they retire or leave the company.
Loans and hardships have a track record of - answer>>>encouraging participation
Loan provisions in particular can be - answer>>>tailored to a plan's employee
demographics, offering one loan at a time, requiring payroll deduction repayment and/or
limiting loan amounts. Although these options increase costs for administration, fees are
charged to the participants taking the loan or the hardship withdrawal, so they don't
affect participants not taking loan or hardships.
In owner-driven plans, advisors should caution owners and partners to - answer>>>to
administer their loan programs for themselves, just as they do for the other plan
participants.
There are advantages to participants in allowing rollovers into the plan from another plan
or IRA: - answer>>>1. Participants can consolidate their retirement accounts.
2. Generally, investing in a 401k is more cost effective than investing in an IRA
3. Participants can take advantage of loans and hardship withdrawal provisions of the
qualified plan.
4. Participants have access to professionally managed 401k investments.
, Large companies may want to consider a - answer>>>traditional 401k with auto
enrollment and a matching contribution. Because of their large size, they are less likely to
consider a safe-harbor design.
Pros of traditional 401k: - answer>>>1. Elective deferrals allow employees to save on a
tax-preferred basis for retirement
2. Employer matching contributions reward employee savings
3. Automatic enrollment designs create better participant outcomes
4. Roth 401(k) deferrals allow for tax-free savings
5. Catch up contributions allow additional savings for employees 50 and older
6. Safe harbor contributions can exempt a plan from nondiscrimination testing
7. Employees can select investments individualized to their needs
8. Designs can be flexible enough to allow for both principal and non-principal savings
benefits
Cons of traditional 401k: - answer>>>1. Complex to administer and design; multiple
contribution sources make record-keeping complicated
2. Safe harbor contributions are fixed not flexible
3. Matching contributions can also be a fixed contribution commitment
4. Subject to ADP/ACP testing, unless the plan uses a safe harbor design
SEP or SIMPLE plans are attractive to start up firms because - answer>>>they are less
expensive to administer.
