CPFA EXAM QUESTIONS AND ANSWERS
A) A TPA performs annual compliance testing. - Answer -Which statement regarding
service providers is TRUE?
A) A TPA performs annual compliance testing.
B) A recordkeeper has the legal obligation to provide an interpretation of a plan
provision.
C) An accountant processes the "money out" for a participant account.
D) A plan advisor is responsible for drafting annual safe harbor notices.
A) Provides efficient contribution and distribution processes. - Answer -Which
statement regarding bundled service arrangements is TRUE?
A) Provides efficient contribution and distribution processes.
B) Requires less fiduciary oversight than an unbundled service arrangement.
C) Permits for specific single provider within the arrangement to be easily removed and
replaced with another provider.
D) Typical arrangement involves a TPA and an insurance company.
A) Combining auto-enrollment with targeted education. - Answer -Based on behavioral
finance research, which of the following is a best practice for producing successful
participant outcomes?
A) Combining auto-enrollment with targeted education.
B) Adding a self-directed brokerage option.
C) Re-enrolling all participants into equity investments.
D) Offering group meetings that focus on participants' rational decision making.
C) DEF has the right to "opt out" and be excluded from the related group. - Answer -
Company ABC and Company DEF are determined to be part of a related group of
companies. All the following are TRUE except:
A) The employees of both ABC and DEF may end up participating in one plan.
B) ABC may be required to make contributions for its employees into DEF's plan.
C) DEF has the right to "opt out" and be excluded from the related group.
D) If DEF adopts a plan, ABC employees may be eligible for the plan.
A) Adding an employer matching contribution equal to 25% up to 12% of compensation
deferred. - Answer -Which of the following plan designs may result in better participant
deferral behavior?
A) Adding an employer matching contribution equal to 25% up to 12% of compensation
deferred.
B) Adding a 3% nonelective safe harbor contribution.
,C) Adding a 1,000 hours of service requirement to receive the employer matching
contribution.
D) Adding a profit-sharing contribution.
B) Can participants convert their existing contribution accounts to Roth accounts? -
Answer -An advisor is meeting with a Plan Sponsor to discuss contribution design in her
plan. All of the following questions will help with this conversation, EXCEPT:
A) Is there a goal that employees should be required to contribute to receive an
employer contribution?
B) Can participants convert their existing contribution accounts to Roth accounts?
C) Is there a group of employees who are unlikely to participate in the plan?
D) How important is it that employees are on track for adequate retirement income?
B) Does the company have an established line of credit? - Answer -Jake is a sole
proprietor and has just established a software development company. He has recently
hired two employees. Currently, the company does not have a good cash flow, but if
Jake can hire more software engineers, growth and profits should increase. Based on
that information, all of the following are questions that an advisor should ask when
establishing a plan for Jake's company, EXCEPT:
A) Can the company's current cash flow support employer contributions?
B) Does the company have an established line of credit?
C) What are Jake's objectives for attracting future employees?
D) Is Jake willing to make a fixed contribution if it enables him to save more?
B) Has at least two partners. - Answer -A partnership is a business that:
A) Cannot have a limited liability structure.
B) Has at least two partners.
C) Is typically run by a board of directors.
D) Reports income on form 1120.
A) A plan advisor should inform the employer that required contributions will be waived
for any year that the company does not make a profit. - Answer -All of the following
describe the impact of a business's cash flow and budget when establishing a plan,
EXCEPT:
A) A plan advisor should inform the employer that required contributions will be waived
for any year that the company does not make a profit.
B) A plan advisor should explain a plan's contribution commitment to the employer.
C) Employers should have a stable cash flow if they are considering adopting a Defined
Benefit/Defined Contribution combination plan.
D) A plan advisor may work with the service provider to show estimates of what
employer contributions would be under different contribution formulas.
, B) Average deferral rate of participants in the plan. - Answer -Which of the following
reports can be used in measuring plan effectiveness and participant outcomes?
A) Number of terminated participants who elected to roll their accounts into IRAs.
B) Average deferral rate of participants in the plan.
C) Independent accountant's required annual audit of the plan.
D) Summary Annual Report.
B) Participants receive a guarantee of lifetime income payments. - Answer -All of the
following are benefits of participant retirement readiness, EXCEPT:
A) Employers can better manage their workforce needs.
B) Participants receive a guarantee of lifetime income payments.
C) Employees may be more satisfied with their jobs when working for an employer that
actively promotes retirement readiness programs.
D) Employers can work with service providers who have tools to assist participants in
increasing retirement savings.
A) What is the average life expectancy for the participants' beneficiaries? - Answer -All
of following are items to consider when developing a strategy to promote successful
participant outcomes, EXCEPT:
A) What is the average life expectancy for the participants' beneficiaries?
B) Should investment advice be offered?
C) Is senior level management interested in promoting "retirement readiness"?
D) What type of participant education should be provided?
D) Participant notices are not required. - Answer -All of the following statements
describe the re-enrollment process of reinvesting participant accounts in the plan's
asset allocation funds, EXCEPT:
A) The re-enrollment of participant accounts is considered a behavioral finance method.
B) Participants are given the opportunity to "opt-out" of the re-enrollment of their
account balances.
C) The goal of the re-enrollment process is to improve participant outcomes by
automatically investing their account balances in asset allocation funds appropriate for
their age.
D) Participant notices are not required.
C) Participant loans are allowed from a SIMPLE 401k plan but not a SIMPLE IRA. -
Answer -Which statement regarding IRA plans and 401k plans is TRUE?
A) SIMPLE IRA plans are used to maximize plan benefits to owners.
B) SIMPLE IRAs and 401ks have the same plan document requirements.
C) Participant loans are allowed from a SIMPLE 401k plan but not a SIMPLE IRA.
A) A TPA performs annual compliance testing. - Answer -Which statement regarding
service providers is TRUE?
A) A TPA performs annual compliance testing.
B) A recordkeeper has the legal obligation to provide an interpretation of a plan
provision.
C) An accountant processes the "money out" for a participant account.
D) A plan advisor is responsible for drafting annual safe harbor notices.
A) Provides efficient contribution and distribution processes. - Answer -Which
statement regarding bundled service arrangements is TRUE?
A) Provides efficient contribution and distribution processes.
B) Requires less fiduciary oversight than an unbundled service arrangement.
C) Permits for specific single provider within the arrangement to be easily removed and
replaced with another provider.
D) Typical arrangement involves a TPA and an insurance company.
A) Combining auto-enrollment with targeted education. - Answer -Based on behavioral
finance research, which of the following is a best practice for producing successful
participant outcomes?
A) Combining auto-enrollment with targeted education.
B) Adding a self-directed brokerage option.
C) Re-enrolling all participants into equity investments.
D) Offering group meetings that focus on participants' rational decision making.
C) DEF has the right to "opt out" and be excluded from the related group. - Answer -
Company ABC and Company DEF are determined to be part of a related group of
companies. All the following are TRUE except:
A) The employees of both ABC and DEF may end up participating in one plan.
B) ABC may be required to make contributions for its employees into DEF's plan.
C) DEF has the right to "opt out" and be excluded from the related group.
D) If DEF adopts a plan, ABC employees may be eligible for the plan.
A) Adding an employer matching contribution equal to 25% up to 12% of compensation
deferred. - Answer -Which of the following plan designs may result in better participant
deferral behavior?
A) Adding an employer matching contribution equal to 25% up to 12% of compensation
deferred.
B) Adding a 3% nonelective safe harbor contribution.
,C) Adding a 1,000 hours of service requirement to receive the employer matching
contribution.
D) Adding a profit-sharing contribution.
B) Can participants convert their existing contribution accounts to Roth accounts? -
Answer -An advisor is meeting with a Plan Sponsor to discuss contribution design in her
plan. All of the following questions will help with this conversation, EXCEPT:
A) Is there a goal that employees should be required to contribute to receive an
employer contribution?
B) Can participants convert their existing contribution accounts to Roth accounts?
C) Is there a group of employees who are unlikely to participate in the plan?
D) How important is it that employees are on track for adequate retirement income?
B) Does the company have an established line of credit? - Answer -Jake is a sole
proprietor and has just established a software development company. He has recently
hired two employees. Currently, the company does not have a good cash flow, but if
Jake can hire more software engineers, growth and profits should increase. Based on
that information, all of the following are questions that an advisor should ask when
establishing a plan for Jake's company, EXCEPT:
A) Can the company's current cash flow support employer contributions?
B) Does the company have an established line of credit?
C) What are Jake's objectives for attracting future employees?
D) Is Jake willing to make a fixed contribution if it enables him to save more?
B) Has at least two partners. - Answer -A partnership is a business that:
A) Cannot have a limited liability structure.
B) Has at least two partners.
C) Is typically run by a board of directors.
D) Reports income on form 1120.
A) A plan advisor should inform the employer that required contributions will be waived
for any year that the company does not make a profit. - Answer -All of the following
describe the impact of a business's cash flow and budget when establishing a plan,
EXCEPT:
A) A plan advisor should inform the employer that required contributions will be waived
for any year that the company does not make a profit.
B) A plan advisor should explain a plan's contribution commitment to the employer.
C) Employers should have a stable cash flow if they are considering adopting a Defined
Benefit/Defined Contribution combination plan.
D) A plan advisor may work with the service provider to show estimates of what
employer contributions would be under different contribution formulas.
, B) Average deferral rate of participants in the plan. - Answer -Which of the following
reports can be used in measuring plan effectiveness and participant outcomes?
A) Number of terminated participants who elected to roll their accounts into IRAs.
B) Average deferral rate of participants in the plan.
C) Independent accountant's required annual audit of the plan.
D) Summary Annual Report.
B) Participants receive a guarantee of lifetime income payments. - Answer -All of the
following are benefits of participant retirement readiness, EXCEPT:
A) Employers can better manage their workforce needs.
B) Participants receive a guarantee of lifetime income payments.
C) Employees may be more satisfied with their jobs when working for an employer that
actively promotes retirement readiness programs.
D) Employers can work with service providers who have tools to assist participants in
increasing retirement savings.
A) What is the average life expectancy for the participants' beneficiaries? - Answer -All
of following are items to consider when developing a strategy to promote successful
participant outcomes, EXCEPT:
A) What is the average life expectancy for the participants' beneficiaries?
B) Should investment advice be offered?
C) Is senior level management interested in promoting "retirement readiness"?
D) What type of participant education should be provided?
D) Participant notices are not required. - Answer -All of the following statements
describe the re-enrollment process of reinvesting participant accounts in the plan's
asset allocation funds, EXCEPT:
A) The re-enrollment of participant accounts is considered a behavioral finance method.
B) Participants are given the opportunity to "opt-out" of the re-enrollment of their
account balances.
C) The goal of the re-enrollment process is to improve participant outcomes by
automatically investing their account balances in asset allocation funds appropriate for
their age.
D) Participant notices are not required.
C) Participant loans are allowed from a SIMPLE 401k plan but not a SIMPLE IRA. -
Answer -Which statement regarding IRA plans and 401k plans is TRUE?
A) SIMPLE IRA plans are used to maximize plan benefits to owners.
B) SIMPLE IRAs and 401ks have the same plan document requirements.
C) Participant loans are allowed from a SIMPLE 401k plan but not a SIMPLE IRA.
