Internal Controls Protect Your Retirement Plan
Formal review procedures can help you find and prevent mistakes in administering your plan. Mistakes left uncorrected could endanger your plan’s tax-favored status.
What are internal controls?
Internal controls are business processes designed to detect and prevent mistakes in your retirement plan.
Internal controls should include procedures for:
- Plan operations review - verify that you operate your plan according to its written terms
- Plan document updates - meet with your benefits professional to see if the plan document needs updating for:
- law changes
- changes in plan operations
The exact procedures will depend on your organization, your plan type and its features.
Plan operations review
Periodically review your plan operations to ensure that you’re following the terms of your written plan.
- Were loans and distributions made according to your plan rules?
- Were all eligible employees timely included in your plan?
See the policies, procedures and internal controls self-audit for sample questions to help you review your plan operations.
Regular review enables you to quickly detect and correct any mistakes.
Plan document updates
A few months before your next plan year begins, check with your benefits advisor to see if you must amend your plan to reflect law changes or operational changes you want to make.
Examples of internal control procedures
- Compare salary deferral election forms with the amounts deducted from employees’ wages
- Verify the types of compensation used for allocations, deferrals and testing
- Check that plan service providers received accurate compensation and ownership records
- Monitor annual contribution and compensation limits
- Verify the validity of rollover contributions to the plan
- Verify that years of service were accurately determined for eligibility and vesting
- Verify marital status and spousal consent for plan distributions
- Ensure participants received required minimum distributions
- Maintaining Your Retirement Plan Records - what to keep and how long
- A Plan Sponsor’s Responsibilities – tips to keep your plan running smoothly
- A Guide to Common Qualified Plan Requirements - laws you must follow to keep your plan eligible for tax-favored treatment
- Correct Your Retirement Plan Errors - overview of the plan correction process for plan sponsors
- Internal Controls are Essential in Retirement Plans – common mistakes in internal controls
- Monitoring Retirement Plan Service Provider Reports - tips for plan sponsors
- Internal Control Questionnaire from EP Audit - what auditors ask about your plan's processes and procedures