401(k) Audit Services in Anaheim, CA. For Anaheim, CA businesses offering their employees 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 isn’t “top-heavy”, there is a lot to keep track of. 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 mandatory. Our team will work with you with every aspect of document collection to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Anaheim, CA, or seeking to simplify a previously cumbersome process, we're here to ensure it’s as smooth and easy as possible. You can schedule 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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About 401(k) Audits
A 401(k) audit is an yearly review necessary for Anaheim, CA companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you don’t have more than 100 employees actively participating in the plan, you must still undergo an audit if there are 100 who are eligible. The audit ensures that the retirement plan adheres to the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s overall financial health, ensuring that employee contributions, distributions, and plan activities are properly documented.
While required for regulatory purposes, 401(k) audits can be challenging and time-consuming. Correct Capital supports Anaheim, CA businesses prepare for these audits by aiding in document collection, assisting with understanding compliance testing, etc... With the right support, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Anaheim, CA Companies?
You are required to undergo a 401(k) audit for multiple purposes, to ensure retirement plans remain compliant with federal regulations and safeguard both the employer and employees. Here’s why they are necessary:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan complies with all legal requirements established by the Department of Labor (DOL) and the IRS, particularly under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit verifies whether the plan isn't overly advantageous to higher-paid employees (often called “top-heavy” testing) in order to promote the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits can uncover errors in contributions, withdrawals, or other aspects of plan management, allowing you to correct these issues before they result in fines.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a yearly filing detailing the plan’s financial status, which is required to maintain compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions do not exceed IRS limits for the year, helping to avoid excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to verify they are reasonable and aren’t unnecessarily high for participants. Excessive fees may prompt compliance concerns and hurt how employees' investments and savings perform.
- Fiduciary Oversight: The audit ensures that Anaheim, CA employers are acting in the best interest of plan participants, meeting their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is one of the most important parts of the audit.
Types of 401(k) Audits
There are two primary types of 401(k) Audits that Anaheim, CA employers could face, depending on factors such as the size and nature of their plan. The audit type typically depends on the number of participants and the complexity of the investments in the plan.
- Full-Scope Audit: This is the more comprehensive audit necessary for most larger 401(k) plans. In a full-scope audit, the third-party auditor evaluates all components of the plan, which includes financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates supporting documentation for contributions, distributions, and other transactions to verify that everything is accurate and in compliance.
- Section 103(a)(3)(C)) Audit: Formerly known as a "Limited Scope Audit," these pertain to plans with investments held by a qualified, regulated financial institution (such as a bank or insurance company). The employer may take advantage of a limited-scope audit. In this type, the auditor is not obligated to audit the investment information endorsed by the financial institution, which can significantly reduce the audit’s complexity and cost. This may make it a preferable choice for some Anaheim, CA businesses, if they satisfy the criteria.
The specific audit required depends on your plan’s unique features, including the nature of its investments. At Correct Capital, we can help you understand which type of audit your plan requires and help you be well-prepared for whichever process is necessary.
401(k) Audit Pain Points for Anaheim, CA Employers
While 401(k) audits are required to meet legal obligations, they frequently pose difficulties for Anaheim, CA employers, particularly those overseeing more substantial retirement plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Assembling the required files, such as account statements, tax returns, and employee data, can be time-consuming. Employers often struggle to sort through and file the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with shifting DOL, IRS, and ERISA regulations can prove difficult. Compliance errors can cause audit failures, penalties, and costly corrections in the long run.
- Discrimination Testing: Ensuring that the plan doesn't favor higher earning employees requires careful compliance checks and can result in additional documentation and reporting.
- Time and Resource Demands: Audit preparation pulls HR professionals, business owners, administrators, and others away from their core responsibilities, adding strain and shifting focus from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 properly and punctually, which is a key component of 401(k) compliance. Failing to meet the submission date 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 Anaheim, CA smoother. From assisting with document collection or confirming conformity with regulations, our team helps take the burden off your shoulders.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For Anaheim, CA employers seeking to reduce the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can offer relief. These plans allow unrelated employers to participate in a unified 401(k) plan, reducing the need for employer-specific audits.
- Multiple Employer Plans (MEP): These plans consolidate several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup enables Anaheim, CA businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs permit unrelated employers to participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it appealing for Anaheim, CA businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while still ensuring compliance with federal regulations. Switching to these types of plans may be particularly attractive for small companies in Anaheim, CA, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Anaheim, CA 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place changes everything. Partnering with professionals that understands both the technical and practical aspects of the audit process reduces the time and pressure you face. Here’s why having the right experts on your side is important:
- Experience and Expertise: A highly experienced group will be familiar with the nuances of 401(k) audits, encompassing full-scope and limited-scope audits. We can guide you through the documentation process and highlight areas for enhancement within your plan.
- Compliance Assurance: The right team helps you remain up to date with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Every 401(k) plan is different. An experienced team will work closely with you to understand the unique needs of your plan and help you prepare for your specific audit requirements. Correct Capital is responsible for managing over 37 plans in both small and large companies, with more than $212 million in total plan assets across the United States, giving us the expertise to handle any company 401(k) plan.
- Saving Time and Resources: Preparing for a 401(k) audit can consume a lot of time from day-to-day operations. The right partner will handle most of the administrative tasks, giving your HR and finance teams to focus on other priorities. 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 audit specific to your plan is not required, you're still required to comply with all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Collaborating with a knowledgeable, reliable team is essential to making sure your 401(k) audit in Anaheim, CA goes as smoothly as possible. With Correct Capital as your partner, you’ll be assured that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Anaheim, CA
Adhering to 401(k) audit regulations is both a mandatory process and an opportunity to ensure your Anaheim, CA company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s experience in assisting Anaheim, CA businesses through the 401(k) audit helps ease the burden, allowing you to focus on your business while avoiding fines for non-compliance.
Contact Correct Capital today to arrange a session and we'll guide you get ready for a streamlined, effective audit. Our team of experts will help with all aspects from document collection through to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Anaheim, CA advisor team, contact us online, or call us at 877-930-401(k) to get started.
