401(k) Audit Services in Birmingham, AL. For Birmingham, AL businesses that offer retirement plans, completing a 401(k) audit can seem like an uphill battle. Between compliance requirements from the Department of Labor (DOL) and IRS, gathering a large amount of paperwork, and ensuring that your plan isn’t “top-heavy”, there are many factors to consider. However, with the right support, the 401(k) audit does not need to disrupt your business and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches even though they are mandatory. Our team will work with you for everything from document collection to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Birmingham, AL, or looking to streamline a previously cumbersome process, we're here to ensure it’s as smooth and easy as possible. 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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About 401(k) Audits
A 401(k) audit is an annual review necessary for Birmingham, AL 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 are still required to have an audit if there are 100 who are eligible. The audit confirms 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 overall financial health, ensuring that employee contributions, distributions, and plan activities are faithfully recorded.
While required for regulatory purposes, 401(k) audits can be challenging and lengthy. Correct Capital supports Birmingham, AL businesses prepare for these audits by aiding in document collection, ensuring comprehension of compliance testing, etc... With an experienced team by your side, handling the audit process can become a much easier process.
Why are 401(k) Audits Necessary for Birmingham, AL Companies?
You need to undergo a 401(k) audit for a variety of 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: The purpose of audits is to confirm that your 401(k) plan follows 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 checks if the plan disproportionately benefits higher-paid employees (often referred to as “top-heavy” testing) to ensure the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, withdrawals, or additional plan operations, allowing you to correct these issues so they don't lead to penalties.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a required document detailing the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions do not exceed IRS contribution limits, preventing excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may review plan fees to verify they are reasonable and not overly expensive for participants. Overpriced fees could lead to compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit confirms that Birmingham, AL employers are serving the interests of plan participants, meeting their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Confirming that the plan's documents, policies, and operational practices are aligned 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 Birmingham, AL employers could face, depending on the size and complexity 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 mandated for most larger 401(k) plans. In a full-scope audit, the external 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 examines supporting documentation for contributions, withdrawls, and other transactions to confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Previously called a "Limited Scope Audit," these pertain to plans with investments managed 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 certified by the financial institution, which can greatly lessen the audit’s complexity and cost. This can make it a better alternative for some Birmingham, AL businesses, provided they meet the criteria.
The type of audit you need is determined by your plan’s unique features, like the nature of its investments. At Correct Capital, we can help you figure out which type of audit your plan is subject to and help you be well-prepared for both audit types.
401(k) Audit Pain Points for Birmingham, AL Employers
While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Birmingham, AL employers, particularly those overseeing more substantial retirement plans. Below are several common challenges that companies deal with:
- Document Collection and Management: Collecting the required files, such as account statements, tax returns, and employee data, can be time-consuming. Employers may find it challenging to arrange and file the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with shifting DOL, IRS, and ERISA regulations is difficult. Compliance oversights can lead to audit failures, sanctions, and pricey amendments in the long run.
- Discrimination Testing: Making sure that the plan isn’t top-heavy involves detailed compliance reviews and can lead to additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit draws HR professionals, business owners, administrators, and others off of their core responsibilities, heightening pressure and diverting attention 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 cause additional problems for the company.
At Correct Capital, we understand these challenges and deliver personalized help to make the audit process in Birmingham, AL more efficient. Whether it’s helping with document collection or ensuring compliance 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 Birmingham, AL employers hoping to ease the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can provide solutions. These plans enable different employers to participate in a unified 401(k) plan, often eliminating 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 Birmingham, AL businesses to distribute the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs allow unrelated employers to join a shared 401(k) plan overseen by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it attractive for Birmingham, AL 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. Moving to one of these plans may be especially appealing to smaller businesses in Birmingham, AL, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Birmingham, AL 401(k) Audit Team
401(k) audits can seem difficult, but having the right team in place can make all the difference. Working with a team that understands both the technical and practical aspects of the audit process helps you avoid unnecessary delays and anxiety. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A skilled team will be familiar with the details of 401(k) audits, including 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, making sure your plan complies with all required guidelines.
- Tailored Support: Every 401(k) plan is different. An experienced team will partner with you to grasp the unique needs of your plan and assist you in getting ready 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, which allows us to understand the nuances of any company 401(k) plan.
- Saving Time and Resources: Getting ready for a 401(k) audit can distract you significantly from day-to-day operations. The ideal support will handle most of the administrative tasks, enabling your HR and finance teams to focus on other priorities. Correct Capital makes the process smoother, 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 separate 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
Partnering with a well-informed, reliable team is key to ensuring your 401(k) audit in Birmingham, AL is as painless as possible. With Correct Capital supporting you, 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 Birmingham, AL
Adhering to 401(k) audit regulations is both a legal requirement and an opportunity to verify your Birmingham, AL company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s knowledge of helping Birmingham, AL businesses navigate the 401(k) audit reduces the strain, enabling you to concentrate on your operations while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to book a meeting and allow us to assist you ensure your audit goes smoothly and efficiently. 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 Birmingham, AL advisor team, contact us online, or call us at 877-930-401(k) to begin.