401(k) Audit Services in Alexandria, VA. For Alexandria, VA businesses that offer retirement plans, completing a 401(k) audit can seem like a daunting task. Between compliance requirements from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan doesn't disproportionately benefit higher-paid employees, it can be overwhelming. However, with the right support, the 401(k) audit can be made much easier and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches and are a regulatory requirement. Our team will work with you with every aspect of document collection to making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in Alexandria, VA, or looking to streamline a previously cumbersome process, we're here to make it as simple and stress-free as possible. You can book a meeting with a member of our advisor team, contact us online, or call us at 877-930-401(k) to get started.
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What is a 401(k) Audit?
A 401(k) audit is an yearly review necessary for Alexandria, VA companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively participating in the plan, you must still undergo an audit if there are 100 who are eligible. The audit verifies that the retirement plan follows the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s financial integrity, ensuring that employee contributions, withdrawals, and plan activities are faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be complicated and demanding. Correct Capital assists Alexandria, VA businesses navigate these audits by aiding in document collection, assisting with understanding compliance testing, as well as other audit processes. With an experienced team in your corner, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Alexandria, VA Companies?
You must undergo a 401(k) audit for several reasons, ensuring that retirement plans remain compliant with federal regulations and safeguard both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan complies with all legal requirements mandated by the Department of Labor (DOL) and the IRS, especially under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit verifies whether the plan does not unfairly favor higher-paid employees (often known as “top-heavy” testing) in order to promote fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in contributions, distributions, or additional plan operations, allowing you to correct these issues so they don't lead to penalties.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a required document summarizing the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions stay within IRS contribution limits, helping to avoid excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may review plan fees to ensure they are reasonable and don’t pose an excessive cost for participants. Overpriced fees could lead to compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit verifies that Alexandria, VA employers are acting in the best interest of plan participants, satisfying their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is one of the most important parts of the audit.
Types of 401(k) Audits
There are two main categories of 401(k) audits that Alexandria, VA employers might come across, depending on factors such as the size and nature of their plan. These types of audits are determined by the structure of the retirement plan, as well as its investment and participant details.
- Full-Scope Audit: This is the more comprehensive audit mandated for most larger 401(k) plans. In a full-scope audit, the third-party auditor reviews all aspects of the plan, which includes financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor reviews supporting documentation for contributions, distributions, and other transactions to ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Previously called a "Limited Scope Audit," these pertain to plans with investments managed by a qualified, regulated financial institution (such as a bank or insurance company). The employer may qualify for a limited-scope audit. In this type, the auditor is not required to audit the investment information endorsed by the financial institution, which can significantly reduce the audit’s complexity and cost. This can make it a more attractive option for some Alexandria, VA businesses, as long as they meet the criteria.
The specific audit required is based on your plan’s specific details, like the nature of its investments. At Correct Capital, we can help you determine which type of audit your plan needs and make sure you're ready for either process.
401(k) Audit Pain Points for Alexandria, VA Employers
While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Alexandria, VA employers, notably those running bigger 401(k) plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Gathering the necessary paperwork, such as account statements, tax returns, and employee data, can be labor-intensive. Employers frequently have difficulties to sort through and submit the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with changing DOL, IRS, and ERISA regulations can be challenging. Compliance errors can result in audit failures, sanctions, and expensive fixes later on.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy involves detailed compliance reviews and can lead to additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit takes HR professionals, business owners, administrators, and others off of their core responsibilities, adding strain and diverting attention from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 properly and punctually, which plays a critical role in 401(k) compliance. Late submissions can result in penalties and complicate things for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to make the audit process in Alexandria, VA less stressful. Be it document collection or ensuring compliance with regulations, our team takes on much of the work for you.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For Alexandria, VA employers looking to lower the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can provide solutions. These plans enable different employers to consolidate into one 401(k) plan, frequently removing employer-specific audits.
- Multiple Employer Plans (MEP): These plans consolidate several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup enables Alexandria, VA businesses to distribute the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs permit unrelated employers to join a shared 401(k) plan administered by a pooled plan provider (PPP). This structure makes meeting regulations easier and lowers expenses, making it a desirable option for Alexandria, VA businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, all while maintaining adherence to regulations. Switching to these types of plans may be highly beneficial for smaller firms in Alexandria, VA, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Alexandria, VA 401(k) Audit Team
401(k) audits can be daunting, but selecting the proper assistance can greatly improve the process. Collaborating with experts that understands both the technical and practical aspects of the audit process helps you avoid unnecessary delays and anxiety. Here’s why partnering with the right experts matters:
- Experience and Expertise: A highly experienced group is knowledgeable about the nuances of 401(k) audits, encompassing full-scope and limited-scope audits. We will assist you with the documentation process and highlight areas for enhancement within your plan.
- Compliance Assurance: The right team ensures you keep up with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will partner with you to grasp the unique needs of your plan and guide you in preparing for your specific audit requirements. Correct Capital currently manages over 37 plans in both small and large companies, with more than $212 million in total plan assets across the United States, which allows us to understand the nuances of any company 401(k) plan.
- Saving Time and Resources: Getting ready for a 401(k) audit can consume a lot of time from day-to-day operations. The ideal support will shoulder a lot of the admin work, giving your HR and finance teams the freedom to concentrate on other tasks. Correct Capital helps streamline the process, reducing the pressure on your internal team.
- MEPs and PEPs Expertise: For businesses in a Multiple Employer Plan (MEP) or Pooled Employer Plan (PEP), while an separate audit is not required, you're still responsible for following all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Working with a experienced, reliable team is essential to making sure your 401(k) audit in Alexandria, VA is as painless as possible. With Correct Capital by your side, you’ll have the confidence that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Alexandria, VA
Adhering to 401(k) audit regulations is both a legal requirement and an important way to confirm your Alexandria, VA company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s knowledge of helping Alexandria, VA businesses complete the 401(k) audit helps ease the burden, letting you prioritize your business while avoiding fines for non-compliance.
Contact Correct Capital today to schedule a consultation and let us help you ensure your audit goes smoothly and efficiently. Our team of experts will support you with everything, including document collection to compliance checks, making sure your plan is set up for success. You can schedule a meeting with a member of our Alexandria, VA advisor team, contact us online, or call us at 877-930-401(k) to begin.
