401(k) Audit Services in Aurora, CO. For Aurora, CO businesses that offer retirement plans, navigating a 401(k) audit can feel like a challenging process. 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 be a major source of stress even though they are mandatory. Our team will work with you with every aspect of document collection through making sure Form 5500 is filed correctly and on time. Whether you're preparing for your first audit in Aurora, CO, or hoping to optimize a process that's usually a burden, we're here to minimize the hassle. You can ask for a meeting with a member of our advisor team, fill out our online form, 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 annual review required for Aurora, CO companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively contributing to the plan, you still need an audit if there are 100 who are eligible. The audit ensures that the retirement plan follows the regulations set by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s financial integrity, ensuring that contributions, withdrawals, and plan activities are faithfully recorded.
While required for regulatory purposes, 401(k) audits can be complicated and demanding. Correct Capital supports Aurora, CO businesses navigate these audits by aiding in document collection, helping clarify compliance testing, and other related tasks. With the right support, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Aurora, CO 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 necessary:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm that your 401(k) plan adheres to all legal requirements mandated by the Department of Labor (DOL) and the IRS, particularly under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit ensures that 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 often expose errors in contributions, withdrawals, or additional plan operations, enabling you to resolve these issues before they result in fines.
- Filing Form 5500: The audit ensures proper and timely submission of Form 5500, an annual report 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 remain within IRS limits for the year, reducing the risk of excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to ensure they are reasonable and aren’t unnecessarily high for participants. Overpriced fees could lead to compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Aurora, CO employers are serving the interests of plan participants, fulfilling their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Confirming that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is a vital part of the audit.
Types of 401(k) Audits
There are two main categories of 401(k) audits that Aurora, CO employers might come across, 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 most detailed audit necessary for most larger 401(k) plans. In a full-scope audit, the independent auditor evaluates all components of the plan, including financial statements, adherence to Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates supporting documentation for contributions, withdrawls, and other transactions to ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Previously called a "Limited Scope Audit," these apply to plans with investments overseen 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 could make it a preferable choice for some Aurora, CO businesses, if they satisfy the criteria.
The kind of audit your plan needs 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 needs and make sure you're ready for either process.
401(k) Audit Pain Points for Aurora, CO Employers
While 401(k) audits must be conducted to ensure compliance, they frequently pose difficulties for Aurora, CO employers, especially those overseeing more substantial retirement plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Collecting the necessary paperwork, such as account statements, tax returns, and employee data, can be a lengthy process. Employers frequently have difficulties to sort through and submit the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with evolving DOL, IRS, and ERISA regulations can prove difficult. Compliance errors can lead to audit failures, fines, 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 necessitate additional documentation and reporting.
- Time and Resource Demands: Audit preparation draws HR professionals, business owners, administrators, and others away from their core responsibilities, heightening pressure and diverting attention from regular business activities.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 correctly and before the deadline, which plays a critical role in 401(k) compliance. Missing the deadline may lead to penalties and cause additional problems for the company.
At Correct Capital, we understand these challenges and deliver personalized help to streamline the audit procedure in Aurora, CO. Whether it’s helping with document collection or verifying adherence to regulations, our team helps take the burden off your shoulders.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For Aurora, CO employers hoping to ease the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can ease the process. These plans allow unrelated employers to consolidate into one 401(k) plan, often eliminating 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 permits Aurora, CO businesses to distribute the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs enable unrelated employers to enter a unified 401(k) plan administered by a pooled plan provider (PPP). This structure streamlines the regulatory process and reduces costs, making it attractive for Aurora, CO businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while still ensuring compliance with federal regulations. Transitioning into an MEP or PEP may be especially appealing to smaller businesses in Aurora, CO, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Aurora, CO 401(k) Audit Team
401(k) audits can appear challenging, but choosing the right support can greatly improve the process. Partnering with professionals that is well-versed in both the technicalities and practicalities 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 is knowledgeable about the details of 401(k) audits, covering both full-scope and limited-scope audits. We help you navigate the documentation process and help identify areas of improvement within your plan.
- Compliance Assurance: The right team will help you stay on top of evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will collaborate with you to identify the unique needs of your plan and guide you in preparing 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: Getting ready for a 401(k) audit can consume a lot of time from day-to-day operations. The proper team will shoulder a lot of the admin work, allowing your HR and finance teams to focus on other priorities. Correct Capital simplifies the entire 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 individual plan audit is no longer mandated, you're still obligated to adhere to all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Collaborating with a experienced, reliable team is crucial for guaranteeing your 401(k) audit in Aurora, CO is as painless as possible. With Correct Capital by your side, you’ll feel secure that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Aurora, CO
Adhering to 401(k) audit regulations is both a legal requirement and an opportunity to verify your Aurora, CO company's retirement plan stays advantageous to your employees. Correct Capital’s knowledge of helping Aurora, CO businesses complete the 401(k) audit reduces the strain, allowing you to focus on your business while preventing penalties for non-compliance.
Contact Correct Capital today to arrange a session and let us help you ensure your audit goes smoothly and efficiently. Our team of experts will support you with everything, including document collection through to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Aurora, CO advisor team, contact us online, or call us at 877-930-401(k) to start the process.
