Employee Benefit Plans Require Strong Internal Controls

Abstract

Employee benefit plans require strong internal controls to operate effectively and efficiently. The Internal Revenue Service and the U.S. Department of Labor have given companies clear indication that they take note of plans that are governed by strong internal controls, and companies will notice more efficient, more focused examinations as a result. A strong system of internal control incorporates both preventive and detective controls to assure the plan is administered in an orderly manner, to safeguard plan assets, to deter wrongdoing, to ensure accuracy and completeness of information and to produce reliable and timely information. A strong control environment would be designed to assure the plan is run in accordance with the plan document and that funds are flowing to the correct trust or individual and according to the timing intended. This gives plan administrators a clear understanding of how the goals of the plan are being met. Good controls would assure policies and procedures are clearly established and are followed to keep the plan in compliance both with the plan document and with all relevant regulatory requirements.