401(k) Audit Services in Aurora, IL. For Aurora, IL businesses that offer retirement plans, navigating a 401(k) audit can seem like a daunting task. Between regulation from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan doesn't favor 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 even though they are a regulatory requirement. Our team will partner 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 Aurora, IL, or seeking to simplify a previously inefficient process, we're here to ensure it’s as smooth and easy as possible. 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 yearly review required for Aurora, IL companies with more than 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively enrolled in the plan, you must still undergo 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 evaluates the plan’s overall financial health, ensuring that employee contributions, withdrawals, and plan activities are faithfully recorded.
While required for regulatory purposes, 401(k) audits can be complicated and lengthy. Correct Capital supports Aurora, IL businesses navigate these audits by helping with document collection, assisting with understanding compliance testing, etc... With an experienced team by your side, getting through the audit can become a much easier process.
Why are 401(k) Audits Necessary for Aurora, IL Companies?
You need to undergo a 401(k) audit for a variety of reasons, to ensure retirement plans remain compliant with federal regulations and safeguard both the employer and employees. Here’s why you need them:
- 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, particularly under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit verifies whether the plan does not unfairly favor higher-paid employees (often called “top-heavy” testing) to guarantee the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits can uncover errors in employee contributions, withdrawals, or additional plan operations, providing an opportunity to fix these issues to avoid penalties.
- Filing Form 5500: The audit guarantees proper and timely submission of Form 5500, a yearly filing summarizing the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit verifies that employer and employee contributions remain within IRS contribution limits, helping to avoid excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to ensure they are reasonable and not overly expensive for participants. Overpriced fees could lead to compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit confirms that Aurora, IL employers are working to benefit plan participants, meeting their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is a critical part of the audit.
Types of 401(k) Audits
There are two kinds of 401(k) audits that Aurora, IL employers might come across, based on the specific details 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 thorough audit necessary for most larger 401(k) plans. In a full-scope audit, the external auditor evaluates all components of the plan, such as financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates supporting documentation for contributions, withdrawls, and other transactions to verify that everything is accurate and in compliance.
- Section 103(a)(3)(C)) Audit: Previously called 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 qualify for a limited-scope audit. In this type, the auditor does not need to audit the investment information certified by the financial institution, which can substantially lower the audit’s complexity and cost. This can make it a preferable choice for some Aurora, IL 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 figure out which type of audit your plan requires and ensure you're fully prepared for both audit types.
401(k) Audit Pain Points for Aurora, IL Employers
While 401(k) audits are required to meet legal obligations, they often present significant challenges for Aurora, IL employers, notably those managing larger plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Collecting the required files, such as account statements, tax returns, and employee data, can be labor-intensive. Employers may find it challenging to sort through and file the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with changing DOL, IRS, and ERISA regulations is difficult. Compliance missteps can cause audit failures, sanctions, 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 off of their core responsibilities, increasing stress and shifting focus from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 correctly and before the deadline, which is a key component of 401(k) compliance. Failing to meet the submission date could cause penalties and cause additional problems for the company.
At Correct Capital, we recognize these obstacles and deliver personalized help to make the audit process in Aurora, IL less stressful. 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 Aurora, IL employers looking to lower the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can offer relief. These plans allow unrelated employers to join a single 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 allows Aurora, IL businesses to share the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs permit unrelated employers to join a shared 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it a desirable option for Aurora, IL businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while still ensuring compliance with federal regulations. Moving to one of these plans may be particularly attractive for small companies in Aurora, IL, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Aurora, IL 401(k) Audit Team
401(k) audits can appear challenging, but selecting the proper assistance changes everything. Working with a team that has a firm grasp of both technical and practical elements of the audit process can save you significant time and stress. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A team of experts understands the details of 401(k) audits, including both full-scope and limited-scope audits. We help you navigate the documentation process and pinpoint potential improvements 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 partner with you to understand the unique needs of your plan and assist you in getting ready 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: Preparing for a 401(k) audit can distract you significantly from day-to-day operations. The right partner will shoulder a lot of the admin work, allowing your HR and finance teams the freedom to concentrate on other tasks. Correct Capital simplifies the entire process, taking the stress off 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 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 knowledgeable, reliable team is crucial for guaranteeing your 401(k) audit in Aurora, IL goes as smoothly as possible. With Correct Capital supporting you, you’ll have the confidence that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in Aurora, IL
Adhering to 401(k) audit regulations is both a regulatory obligation and an opportunity to ensure your Aurora, IL company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s knowledge of helping Aurora, IL businesses navigate the 401(k) audit lightens the load, allowing you to focus on your business while preventing penalties for non-compliance.
Contact Correct Capital today to schedule a consultation and allow us to assist 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, IL advisor team, contact us online, or call us at 877-930-401(k) to get started.
