Operational Compliance: Who’s in Control of the Controls?

In recent years, regulators have intensified their focus on retirement plan controls. Given this scrutiny, it’s critical that the proper procedures and controls are in place for your qualified plan.

Operational compliance controls are an area of focus for the regulators. Specifically, you should make sure that your plan operations are consistent not only with your plan document but also that they meet the terms and conditions of all applicable laws.

Failure to do so could expose your plan to penalties and high costs to correct errors identified during a plan audit. In a worst-case scenario, it could even lead to the loss of qualified plan status.

Evaluating your controls

One way to authenticate that your plan’s operational compliance controls are adequate is to evaluate them at each stage of a worker’s employment lifecycle. These stages typically include the following:

Plan Entry
Controls should verify the accuracy of demographic and employment information, such as employees’ dates of birth and hire, the number of hours worked, and participation eligibility. Controls should also validate timely enrollment for eligible employees and on-time delivery of required notices, such as those regarding automatic enrollment and safe harbor contributions.
Accumulation of Benefits
Controls should demonstrate employee salary deferrals are properly calculated, including accurate determination of covered compensation, and prompt execution of changes in deferral elections.
Vesting Schedules
Controls should attest that all applicable service hours are counted toward vesting and that vesting is properly determined before benefit distributions begin.
Distribution of Benefits
Controls should confirm that all participants have received a summary of and clearly understand the plan’s distribution provisions and that distributions are only made to the participant.

The summary should include triggering events applicable under the plan’s terms, commencement dates for distributions, different distribution options (e.g., installments, lump sums, annuities), and any required income tax withholding, among other information.

Organizing plan information

Your plan’s operational compliance controls should also authenticate that procedures are in place for the organization and retention of a wide range of plan information. This typically includes participant demographics and benefit determinations, testing results, consent forms, distributions, and applicable government filings, among other documents.

We can help evaluate your qualified plan’s controls to ensure proper procedures are in place.

About the Authors

Dana E. Mountjoy
Dana E. Mountjoy
Partner, Assurance and Advisory


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