401(k) Audit Services in Baltimore, MD. For Baltimore, MD businesses that offer retirement plans, navigating a 401(k) audit can seem like an uphill battle. 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, there are many factors to consider. 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 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 Baltimore, MD, or seeking to simplify a process that's usually a burden, we're here to make it as simple and stress-free as possible. You can ask for 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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About 401(k) Audits
A 401(k) audit is an yearly review mandated for Baltimore, MD companies who have 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 still need an audit if there are 100 who are eligible. The audit confirms that the retirement plan adheres to the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s financial integrity, ensuring that employee contributions, distributions, and operations are properly documented.
While necessary to meet legal requirements, 401(k) audits can be challenging and time-consuming. Correct Capital supports Baltimore, MD businesses navigate these audits by assisting with document collection, helping clarify compliance testing, etc... With an experienced team in your corner, handling the audit process can become a far more manageable task.
Why are 401(k) Audits Necessary for Baltimore, MD Companies?
You need to undergo a 401(k) audit for several reasons, to ensure retirement plans remain compliant with federal regulations and protect both the employer and employees. Here’s why they are necessary:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan adheres to all legal requirements mandated by the Department of Labor (DOL) and the IRS, with emphasis 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 ensure the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits can uncover errors in employee contributions, distributions, or other facets of plan oversight, providing an opportunity to fix these issues to avoid fines.
- Filing Form 5500: The audit confirms the accurate and on-time filing 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, helping to avoid excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may examine plan fees to confirm they are reasonable and don’t pose an excessive cost for participants. High fees can raise compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit ensures that Baltimore, MD employers are working to benefit plan participants, satisfying 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 a key part of the audit.
Types of 401(k) Audits
There are two main categories of 401(k) audits that Baltimore, MD 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 thorough audit necessary for most larger 401(k) plans. In a full-scope audit, the independent 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 evaluates 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 are for 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 required to audit the investment information verified by the financial institution, which can greatly lessen the audit’s complexity and cost. This could make it a more attractive option for some Baltimore, MD businesses, provided they meet the criteria.
The specific audit required is based on your plan’s specific details, including the nature of its investments. At Correct Capital, we can help you determine which type of audit your plan requires and help you be well-prepared for both audit types.
401(k) Audit Pain Points for Baltimore, MD Employers
While 401(k) audits are required to meet legal obligations, they often present significant challenges for Baltimore, MD employers, particularly those overseeing more substantial retirement plans. Here are some of the key pain points that employers encounter:
- Document Collection and Management: Assembling the necessary paperwork, such as account statements, tax returns, and employee data, can be labor-intensive. Employers often struggle to organize and file the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with shifting DOL, IRS, and ERISA regulations can be challenging. Compliance oversights can cause audit failures, fines, and costly corrections down the line.
- 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: Preparing for an audit draws HR professionals, business owners, administrators, and others off of their core responsibilities, increasing stress and diverting attention from regular business activities.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 accurately and on time, which is essential to 401(k) compliance. Missing the deadline can result in penalties and cause additional problems for the company.
At Correct Capital, we understand these challenges and offer customized assistance to streamline the audit procedure in Baltimore, MD. 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 Baltimore, MD employers seeking to reduce the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can provide solutions. 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, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup permits Baltimore, MD businesses to distribute 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 participate in a collective 401(k) plan managed by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it a desirable option for Baltimore, MD businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, while ensuring regulatory compliance. Transitioning into an MEP or PEP may be particularly attractive for small companies in Baltimore, MD, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Baltimore, MD 401(k) Audit Team
401(k) audits can be daunting, 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 highly experienced group is knowledgeable about the complexities of 401(k) audits, encompassing 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, ensuring that your plan meets all necessary standards.
- Tailored Support: All 401(k) plans are distinct. An experienced team will collaborate with you to grasp the unique needs of your plan and help you prepare for your specific audit requirements. Correct Capital handles more than 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 take considerable time away from day-to-day operations. The ideal support will take on much of the administrative burden, giving your HR and finance teams to focus on other priorities. Correct Capital makes the process smoother, easing the load for 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 responsible for following all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Partnering with a knowledgeable, reliable team is essential to making sure your 401(k) audit in Baltimore, MD runs efficiently and stress-free. With Correct Capital by your side, you’ll have the confidence that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Baltimore, MD
Adhering to 401(k) audit regulations is both a regulatory obligation and an important way to confirm your Baltimore, MD company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s expertise in guiding Baltimore, MD businesses through the 401(k) audit helps ease the burden, enabling you to concentrate on your operations 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 assist with everything from document collection to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Baltimore, MD advisor team, contact us online, or call us at 877-930-401(k) to begin.
