403(b) AUDIT PROGRAM


SUBMITTED BY:
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Jim Menghi, CFE, CPA
UCAR Internal Audit and Compliance
UCAR
P.O. Box 3000
Boulder, CO   80307-3000
email: menghi@ncar.ucar.edu
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Review 403(b) Retirement Plans
Objectives:

To determine whether a Retirement Plan complies with the IRS code for 403(b)
retirement plans.

Scope:

1.	Determine the accessibility of plan documents including annuity contracts,
official plan documents and Form 5500 Annual Reports (if applicable), salary
reduction agreements for employees, employee communication materials including
summary plan descriptions, brochures describing investment funds, and notices
sent to participants age 70 1/2.  Determine whether the employer is eligible
to sponsor a 403(b) plan.

2.	Determine whether employees' contributions to retirement plan comply with
the limits mandated by IRS codes 402(g), 403(b), and 415.  

A.	Select a stratified statistical sampling of employees based on salary
levels and calculate the estimated 1994 maximum exclusion allowance and
compare this to the projected salary reduction accumulations.  If an excess
contribution is detected, did Human Resource (HR) also detect this and notify
the participant?  Did HR instruct the plan manager to refund the excess by
April 15 and was this accomplished?  Discuss any identified problems with HR
officials.

3. 	Determine whether the salary reduction agreements meet the IRS 403(b)
regulations.

A.	Select a sample of plan participants and review their salary reduction
agreements.  Are the salary reduction agreements in writing, signed by the
participant, and contain language that makes the agreeement legally binding? 
Ensure that the agreement applies only to amounts earned after the agreement
becomes effective and only one agreement is made per plan year.  Also, ensure
that the manner in which the agreement was completed does not jeopardize its
legality.  For example, are there changes or corrections to the reduction
percentage or amount that have not be initialed by the plan participant?

4.	Determine whether the administration of the retirement plan complies with
IRS code provisions regarding plan distributions, plan participation or
prohibition of discrimination, the annual and periodic reporting.

A.	Obtain a list of all employees illustrating the salary, employee and
employer plan contributions by employee, and analyze the list to ensure that
plan participation meets the minimum participation, minimum coverage and
general nondisrimination requirements.  Perform the IRS 410(m) matching test
for voluntary plans.

B.	Contact the plan administrator and ask them about their efforts to track
plan participants meeting the minimum distribution requirements for
participants over 70 1/2 years of age.  Obtain a list of participants who were
this age by years end.  Ask the plan management to confirm that these
participants had initiated minimum distributions.  If not, consider other
steps to notify participants of the potential excise tax liability for failing
to comply.

C.	Request copies of 5500 annual reports and required IRS filings, do be
determined, for past 2 calendar years.  Review the filing or distribution
dates and their compliance with IRS regulation guidelines.

Helpful Hints:

1.  IRS's WWW site has the filing instructions for 5500 annual reports.

2.  IRS has issued audit guidelines for their examination of 403(b) plans on
April 18, 1995.  Obtain a copy and modify the above audit plan to meet your
retirement plan's needs.