401(k) Audit Services in Austin, TX. For Austin, TX businesses that offer retirement plans, completing a 401(k) audit can feel like a challenging process. Between compliance requirements from the Department of Labor (DOL) and IRS, collecting extensive documentation, 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 does not need to disrupt your business and interfere with your company’s daily 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 making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in Austin, TX, or hoping to optimize a previously inefficient process, we're here to minimize the hassle. 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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Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
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What is a 401(k) Audit?
A 401(k) audit is an yearly review required for Austin, TX companies who have more than 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively participating in the plan, you are still required to have an audit if there are 100 who are eligible. The audit verifies that the retirement plan adheres to the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s financial integrity, ensuring that contributions, distributions, and operations are properly documented.
While necessary for compliance, 401(k) audits can be complicated and demanding. Correct Capital assists Austin, TX businesses get ready for these audits by helping with document collection, helping clarify compliance testing, and other related tasks. With an experienced team by your side, handling the audit process can become a far more manageable task.
Why are 401(k) Audits Necessary for Austin, TX Companies?
You must undergo a 401(k) audit for several reasons, ensuring that retirement plans adhere to federal regulations and protect both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: A 401(k) audit guarantees that your 401(k) plan adheres to all legal requirements set 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 called “top-heavy” testing) to guarantee fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, withdrawals, or other aspects of plan management, allowing you to correct these issues before they result in penalties.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a required document that outlines the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions do not exceed IRS limits for the year, helping to avoid excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may review plan fees to verify they are reasonable and not overly expensive for participants. Excessive fees may prompt compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Austin, TX employers are working to benefit plan participants, meeting their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are aligned 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 Austin, TX employers might come across, based on the specific details 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 independent auditor evaluates all components of the plan, including financial statements, conformance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines 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 is not obligated to audit the investment information endorsed by the financial institution, which can substantially lower the audit’s complexity and cost. This may make it a preferable choice for some Austin, TX businesses, as long as they meet the criteria.
The specific audit required is based on your plan’s particular characteristics, such as the nature of its investments. At Correct Capital, we will guide you to 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 Austin, TX Employers
While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Austin, TX employers, especially those running bigger 401(k) plans. Here are some of the key pain points that companies deal with:
- Document Collection and Management: Assembling the necessary paperwork, such as account statements, tax returns, and employee data, can be a lengthy process. Employers may find it challenging to arrange and submit the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with changing DOL, IRS, and ERISA regulations can be challenging. Compliance errors can result in audit failures, penalties, and costly corrections down the line.
- Discrimination Testing: Verifying that the plan isn’t top-heavy requires careful compliance checks and can result in additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit takes HR professionals, business owners, administrators, and others away from their core responsibilities, adding strain and shifting focus from regular business activities.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 properly and punctually, which is essential to 401(k) compliance. Failing to meet the submission date could cause penalties and create further issues for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to make the audit process in Austin, TX more efficient. Whether it’s helping with document collection or verifying adherence to 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 Austin, TX employers seeking to reduce the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can ease the process. These plans permit various businesses to join a single 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans combine several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup allows Austin, TX 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 overseen by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it a desirable option for Austin, TX 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. Switching to these types of plans may be highly beneficial for smaller firms in Austin, TX, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Austin, TX 401(k) Audit Team
401(k) audits can seem difficult, but selecting the proper assistance can make all the difference. Collaborating with experts 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 having the right experts on your side is important:
- Experience and Expertise: A skilled team understands the nuances of 401(k) audits, including both full-scope and limited-scope audits. We can guide you through the documentation process and pinpoint potential improvements within your plan.
- Compliance Assurance: The right team ensures you keep up with evolving regulations, making sure your plan complies with all required guidelines.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will partner 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, and represents over $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: Audit preparation 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 to focus on other priorities. Correct Capital simplifies the entire process, reducing the pressure on your internal team.
- MEPs and PEPs Expertise: For businesses participating in an MEP or PEP, while an separate audit is not required, you're still obligated to adhere to all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Collaborating with a experienced, reliable team is crucial for guaranteeing your 401(k) audit in Austin, TX runs efficiently and stress-free. With Correct Capital as your partner, you’ll feel secure that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Austin, TX
Complying with 401(k) audits is both a regulatory obligation and an opportunity to ensure your Austin, TX company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s expertise in guiding Austin, TX businesses through the 401(k) audit lightens the load, letting you prioritize your business while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to schedule a consultation and we'll guide you prepare for a smooth, efficient audit. Our team of experts will support you with everything, including document collection to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Austin, TX advisor team, contact us online, or call us at 877-930-401(k) to get started.
