In many ways, 403(b) plans are similar to 401(k) plans. One key difference is that only tax-exempt organizations can offer 403(b) plans.
The histories of 403(b) and 401(k) plans are quite different as well. Until 2009 plan years, 403(b) plans were not subject to audit. As a result, many 403(b) plans had difficult transitions in the effort to achieve regulatory compliance.
A few of the key areas of emphasis in the audit of a 403(b) plan include:
The timeliness of remittances to the Plan. Since money is withheld from participants’ paychecks, plan sponsors of large retirement plans (>100 participants) are legally required to deposit those funds into the plan as soon as administratively feasible.
The definition of compensation. There are many ways to define compensation, but it is important that a plan follows the definition set forth in its governing documents.
Assets held with multiple “vendors”. 403(b) plan assets are not required to be held in trust. In many cases, multiple “vendors” offered investments to participants and set up contracts under the plan but directly with participants. Especially for older 403(b) plans, getting a handle on the beginning balances based on plan history can be challenging and sometimes not possible. Luckily the Department of Labor has provided some relief in the form of allowable scope limitations on audits of old contracts in 403(b) plans.
At Pension Assurance LLP, we design our audits to specifically address these and other key audit risk areas specific to 403(b) plans. When issues are noted, we take a proactive approach, focusing on how to resolve any past errors and make changes to the plan or its operations to prevent the issue in the future. While we must maintain objectivity and independence, we don’t believe that requires us to be adversarial. We take great pride in helping clients positively address issues when they arise.