CPFA License Exam Certified Plan Fiduciary Actual Exam Newest With Complete Questions
And Correct Detailed Answers| Brand New Version!
Question 1
Under ERISA Section 404, the "Exclusive Purpose Rule" is primarily associated with which
fiduciary standard?
A) Prudence
B) Diversification
C) Loyalty
D) Following Plan Documents
E) Transparency
Correct Answer: C) Loyalty
Rationale: The duty of loyalty, often called the "exclusive purpose rule," requires
fiduciaries to act solely in the interest of plan participants and beneficiaries. This includes
providing benefits and defraying reasonable plan administration expenses, rather than
acting for the benefit of the employer or plan sponsor.
Question 2
A plan fiduciary decides to hire an expert to help with an investment selection because they lack
the specific expertise themselves. This action is a direct application of which fiduciary standard?
A) The Duty to Diversify
B) The Duty of Prudence
C) The Duty of Disclosure
D) The Duty of Obedience
E) The Duty of Loyalty
Correct Answer: B) The Duty of Prudence
Rationale: The "Prudent Expert" rule requires fiduciaries to act with the care, skill, and
diligence that a prudent person acting in a like capacity would use. If a fiduciary does not
have the knowledge to make a decision, prudence dictates that they must hire an expert to
assist and document that process.
Question 3
When a fiduciary is diversifying plan investments to minimize the risk of large losses, which of
the following factors should they consider according to ERISA?
A) The plan sponsor’s corporate tax rate
B) The personal investment preferences of the CFO
C) Participant demographics and investment acumen
D) The current stock price of the employer
E) Only the total amount of assets in the plan
Correct Answer: C) Participant demographics and investment acumen
Rationale: Diversification must be handled in a prudent manner. ERISA suggests that
fiduciaries consider the purpose of the plan, the amount of assets, and the
, 2
demographics/sophistication of the participants to ensure the investment lineup is
appropriate for the specific group being served.
Question 4
Under what circumstance may a fiduciary deviate from the plan’s governing documents?
A) When the plan sponsor requests a change to save money.
B) When the documents are inconsistent with the provisions of ERISA.
C) When the investments in the plan are underperforming.
D) When a key employee wants to take a larger loan than allowed.
E) Never; the plan document must be followed regardless of law.
Correct Answer: B) When the documents are inconsistent with the provisions of ERISA.
Rationale: Fiduciaries are required to follow the plan documents, but only to the extent that
those documents are consistent with ERISA. If a plan document requires an action that
violates ERISA law, the fiduciary must prioritize ERISA compliance.
Question 5
How many fiduciaries must a retirement plan have at a minimum?
A) Zero
B) Exactly one
C) One or more
D) At least three (Sponsor, Trustee, and Administrator)
E) Ten
Correct Answer: C) One or more
Rationale: ERISA requires every plan to have at least one "named fiduciary" who has the
authority to control and manage the operation and administration of the plan. In practice,
most plans have multiple fiduciaries.
Question 6
Plan fiduciaries have a legal obligation to operate the plan primarily for the benefit of:
A) The Plan Sponsor’s shareholders
B) The Employer’s executive board
C) Plan participants and their beneficiaries
D) The Department of Labor
E) The investment advisor
Correct Answer: C) Plan participants and their beneficiaries
Rationale: The primary rule of ERISA is that the plan must be run for the exclusive benefit
of the participants and their beneficiaries. It is illegal to operate the plan for the benefit of
the owners, the employer, or key employees at the expense of the general participants.
Question 7
Which of the following entities is almost always considered a fiduciary to a retirement plan?
, 3
A) The plan’s custodial bank
B) The Plan Trustee
C) A non-fiduciary TPA
D) The company’s janitorial service
E) A person providing purely ministerial tasks
Correct Answer: B) The Plan Trustee
Rationale: The Plan Trustee, the Plan Sponsor, and the Plan Administrator are the three
core roles that almost always carry fiduciary status because they exercise discretionary
authority or control over plan management or assets.
Question 8
Which statement regarding the personal liability of a plan fiduciary is true?
A) Fiduciaries are only liable for the amount of their personal account balance.
B) Liability is limited to the company’s corporate assets.
C) All fiduciaries have personal liability for breaches of their duties.
D) Only the Plan Sponsor has personal liability.
E) Fiduciaries cannot be sued if they have insurance.
Correct Answer: C) All fiduciaries have personal liability
Rationale: One of the most significant aspects of being an ERISA fiduciary is that you are
personally liable to make good any losses to the plan resulting from a breach of fiduciary
duty. This means personal assets (homes, bank accounts) can be at risk.
Question 9
What does it mean to be a plan fiduciary in terms of responsibility?
A) To maximize the profits of the employer
B) To operate the plan according to the plan document and act prudently
C) To ensure the plan advisor receives the highest possible commission
D) To limit employee participation to reduce costs
E) To follow the instructions of the CEO even if they violate ERISA
Correct Answer: B) To operate the plan according to the plan document and act prudently
Rationale: Being a fiduciary involves several core duties: acting prudently, following plan
documents (if ERISA-compliant), acting exclusively in the interest of participants, and
running the plan only to provide benefits and pay reasonable expenses.
Question 10
If a Plan Sponsor hires other people to serve as the Trustee and Plan Administrator, what is the
Sponsor's remaining fiduciary duty?
A) They no longer have any fiduciary duties.
B) They must still manage all the investments personally.
C) They must prudently select and monitor the named fiduciaries.
D) They are responsible for filing the 5500 and nothing else.
And Correct Detailed Answers| Brand New Version!
Question 1
Under ERISA Section 404, the "Exclusive Purpose Rule" is primarily associated with which
fiduciary standard?
A) Prudence
B) Diversification
C) Loyalty
D) Following Plan Documents
E) Transparency
Correct Answer: C) Loyalty
Rationale: The duty of loyalty, often called the "exclusive purpose rule," requires
fiduciaries to act solely in the interest of plan participants and beneficiaries. This includes
providing benefits and defraying reasonable plan administration expenses, rather than
acting for the benefit of the employer or plan sponsor.
Question 2
A plan fiduciary decides to hire an expert to help with an investment selection because they lack
the specific expertise themselves. This action is a direct application of which fiduciary standard?
A) The Duty to Diversify
B) The Duty of Prudence
C) The Duty of Disclosure
D) The Duty of Obedience
E) The Duty of Loyalty
Correct Answer: B) The Duty of Prudence
Rationale: The "Prudent Expert" rule requires fiduciaries to act with the care, skill, and
diligence that a prudent person acting in a like capacity would use. If a fiduciary does not
have the knowledge to make a decision, prudence dictates that they must hire an expert to
assist and document that process.
Question 3
When a fiduciary is diversifying plan investments to minimize the risk of large losses, which of
the following factors should they consider according to ERISA?
A) The plan sponsor’s corporate tax rate
B) The personal investment preferences of the CFO
C) Participant demographics and investment acumen
D) The current stock price of the employer
E) Only the total amount of assets in the plan
Correct Answer: C) Participant demographics and investment acumen
Rationale: Diversification must be handled in a prudent manner. ERISA suggests that
fiduciaries consider the purpose of the plan, the amount of assets, and the
, 2
demographics/sophistication of the participants to ensure the investment lineup is
appropriate for the specific group being served.
Question 4
Under what circumstance may a fiduciary deviate from the plan’s governing documents?
A) When the plan sponsor requests a change to save money.
B) When the documents are inconsistent with the provisions of ERISA.
C) When the investments in the plan are underperforming.
D) When a key employee wants to take a larger loan than allowed.
E) Never; the plan document must be followed regardless of law.
Correct Answer: B) When the documents are inconsistent with the provisions of ERISA.
Rationale: Fiduciaries are required to follow the plan documents, but only to the extent that
those documents are consistent with ERISA. If a plan document requires an action that
violates ERISA law, the fiduciary must prioritize ERISA compliance.
Question 5
How many fiduciaries must a retirement plan have at a minimum?
A) Zero
B) Exactly one
C) One or more
D) At least three (Sponsor, Trustee, and Administrator)
E) Ten
Correct Answer: C) One or more
Rationale: ERISA requires every plan to have at least one "named fiduciary" who has the
authority to control and manage the operation and administration of the plan. In practice,
most plans have multiple fiduciaries.
Question 6
Plan fiduciaries have a legal obligation to operate the plan primarily for the benefit of:
A) The Plan Sponsor’s shareholders
B) The Employer’s executive board
C) Plan participants and their beneficiaries
D) The Department of Labor
E) The investment advisor
Correct Answer: C) Plan participants and their beneficiaries
Rationale: The primary rule of ERISA is that the plan must be run for the exclusive benefit
of the participants and their beneficiaries. It is illegal to operate the plan for the benefit of
the owners, the employer, or key employees at the expense of the general participants.
Question 7
Which of the following entities is almost always considered a fiduciary to a retirement plan?
, 3
A) The plan’s custodial bank
B) The Plan Trustee
C) A non-fiduciary TPA
D) The company’s janitorial service
E) A person providing purely ministerial tasks
Correct Answer: B) The Plan Trustee
Rationale: The Plan Trustee, the Plan Sponsor, and the Plan Administrator are the three
core roles that almost always carry fiduciary status because they exercise discretionary
authority or control over plan management or assets.
Question 8
Which statement regarding the personal liability of a plan fiduciary is true?
A) Fiduciaries are only liable for the amount of their personal account balance.
B) Liability is limited to the company’s corporate assets.
C) All fiduciaries have personal liability for breaches of their duties.
D) Only the Plan Sponsor has personal liability.
E) Fiduciaries cannot be sued if they have insurance.
Correct Answer: C) All fiduciaries have personal liability
Rationale: One of the most significant aspects of being an ERISA fiduciary is that you are
personally liable to make good any losses to the plan resulting from a breach of fiduciary
duty. This means personal assets (homes, bank accounts) can be at risk.
Question 9
What does it mean to be a plan fiduciary in terms of responsibility?
A) To maximize the profits of the employer
B) To operate the plan according to the plan document and act prudently
C) To ensure the plan advisor receives the highest possible commission
D) To limit employee participation to reduce costs
E) To follow the instructions of the CEO even if they violate ERISA
Correct Answer: B) To operate the plan according to the plan document and act prudently
Rationale: Being a fiduciary involves several core duties: acting prudently, following plan
documents (if ERISA-compliant), acting exclusively in the interest of participants, and
running the plan only to provide benefits and pay reasonable expenses.
Question 10
If a Plan Sponsor hires other people to serve as the Trustee and Plan Administrator, what is the
Sponsor's remaining fiduciary duty?
A) They no longer have any fiduciary duties.
B) They must still manage all the investments personally.
C) They must prudently select and monitor the named fiduciaries.
D) They are responsible for filing the 5500 and nothing else.
