Internal Controls

Q. What are internal controls, and why do they matter?

A. Internal controls serve as an employer’s established procedures to operate its 403(b) plan in accordance with the terms of the 403(b) plan document, the Internal Revenue Code (IRC), and (if applicable) ERISA.   

Internal controls matter because if there is an IRS audit of a 403(b) plan, the strength and adequacy of an employer’s internal controls may be a factor in whether the IRS audit is extensive or not. In addition, if a plan sponsor has established internal controls, that employer may be able to utilize the IRS’s self-correction program to resolve certain operational failures.