Procedures a 403(b) Plan Sponsor’s Internal Controls Should Cover

Q. What procedures should a 403(b) plan sponsor’s internal controls cover? 

A. A 403(b) plan sponsor’s internal controls should cover the following procedures:

Human Resources procedures, including:

• notifying eligible employees of the opportunity to contribute to the 403(b) plan; 
• communicating the plan to newly hired employees; 
• determining under what circumstances an individual is considered an independent contractor rather than an employee; and 
• maintaining records regarding an employee’s date of hire and termination (and, if applicable, rehire). 

Payroll procedures, including:

• remitting contributions to the plan’s investment providers; and
• maintaining payroll systems edits to safeguard against amounts contributed in excess of annual IRC contribution limits. 

Preservation of documents in compliance with applicable laws, including:

• 403(b) plan document, plan amendments, and related board resolutions authorizing adoption of the plan document or amendments (as applicable);
• employees’ completed salary deferral election forms; 
• supporting documentation (including date of birth and years of service) for employees who are making any catch-up contributions as may be permitted under the 403(b) plan; 
• a list of investment providers currently authorized to receive contributions and/or contract exchanges under the 403(b) plan; and 
• information sharing agreements with current and legacy investment providers in accordance with IRS regulatory requirements for loans, hardships, and other distributions from the 403(b) plan.