401(k) Audit Services in Chesapeake, VA. For Chesapeake, VA businesses that offer retirement plans, completing a 401(k) audit can seem like a daunting task. Between regulation from the Department of Labor (DOL) and IRS, gathering a large amount of paperwork, and ensuring that your plan doesn't favor higher-paid employees, there is a lot to keep track of. However, with the right support, the 401(k) audit can be made much easier and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can create significant headaches and are mandatory. Our team will work with you for everything from document collection through meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Chesapeake, VA, or hoping to optimize a process that's usually a burden, we're here to make it as simple and stress-free as possible. You can schedule 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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About 401(k) Audits
A 401(k) audit is an annual review mandated for Chesapeake, VA companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you do not 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 follows 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 contributions, distributions, and operations are accurately represented.
While required for regulatory purposes, 401(k) audits can be complex and lengthy. Correct Capital assists Chesapeake, VA businesses prepare for these audits by assisting with document collection, assisting with understanding compliance testing, etc... With an experienced team in your corner, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Chesapeake, VA Companies?
You need to undergo a 401(k) audit for a variety of reasons, to ensure retirement plans remain compliant with federal regulations and protect both the employer and employees. Here’s why you need them:
- Compliance with DOL and IRS Regulations: A 401(k) audit guarantees that your 401(k) plan adheres to all legal requirements mandated by the Department of Labor (DOL) and the IRS, especially under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit ensures that the plan does not unfairly favor higher-paid employees (often called “top-heavy” testing) to ensure fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in contributions, distributions, or other aspects of plan management, enabling you to resolve these issues before they result in fines.
- Filing Form 5500: The audit guarantees proper and timely submission of Form 5500, an annual report summarizing the plan’s financial status, which is required to maintain compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions do not exceed IRS contribution limits, reducing the risk of excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to verify they are reasonable and don’t pose an excessive cost for participants. Overpriced fees could lead to compliance concerns and hurt how employees' investments and savings perform.
- Fiduciary Oversight: The audit confirms that Chesapeake, VA employers are acting in the best interest of plan participants, meeting their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is a critical part of the audit.
Types of 401(k) Audits
There are two kinds of 401(k) audits that Chesapeake, VA 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 more comprehensive audit necessary for most larger 401(k) plans. In a full-scope audit, the third-party auditor examines every part 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 ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Previously referred to as a "Limited Scope Audit," these apply 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 may make it a preferable choice for some Chesapeake, VA businesses, if they satisfy the criteria.
The kind of audit your plan needs is determined by your plan’s unique features, such as the nature of its investments. At Correct Capital, we are able to assist you understand which type of audit your plan is subject to and help you be well-prepared for either process.
401(k) Audit Pain Points for Chesapeake, VA Employers
While 401(k) audits must be conducted to ensure compliance, they frequently pose difficulties for Chesapeake, VA employers, notably those managing larger plans. These are some of the major issues that companies deal with:
- Document Collection and Management: Gathering the required files, such as account statements, tax returns, and employee data, can be time-consuming. Employers may find it challenging to organize and file the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with changing DOL, IRS, and ERISA regulations can be challenging. Compliance missteps can result in audit failures, penalties, and pricey amendments later on.
- Discrimination Testing: Making sure that the plan doesn't favor higher earning employees requires careful compliance checks and can necessitate additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit draws HR professionals, business owners, administrators, and others out of their core responsibilities, heightening pressure and distracting them from regular business activities.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 accurately and on time, which plays a critical role in 401(k) compliance. Missing the deadline could cause penalties and complicate things for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to streamline the audit procedure in Chesapeake, VA. Be it 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 Chesapeake, VA employers hoping to ease the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can offer relief. These plans enable different employers to consolidate into one 401(k) plan, reducing the need for employer-specific audits.
- Multiple Employer Plans (MEP): These plans pool together several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup allows Chesapeake, VA businesses to share the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs enable unrelated employers to participate in a collective 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it a desirable option for Chesapeake, VA businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, all while maintaining adherence to regulations. Transitioning into an MEP or PEP may be highly beneficial for smaller firms in Chesapeake, VA, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Chesapeake, VA 401(k) Audit Team
401(k) audits can seem difficult, but choosing the right support changes everything. Partnering with professionals that has a firm grasp of both technical and practical elements of the audit process reduces the time and pressure you face. Here’s why partnering with the right experts matters:
- Experience and Expertise: A highly experienced group will be familiar with the complexities of 401(k) audits, covering both full-scope and limited-scope audits. We can guide you through the documentation process and highlight areas for enhancement within your plan.
- Compliance Assurance: The right team ensures you keep up with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will work closely 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, representing over $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: Audit preparation can consume a lot of time 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, easing the load for your internal team.
- MEPs and PEPs Expertise: For businesses participating in an MEP or PEP, while an individual plan audit is no longer mandated, you're still required to comply with all the rules and regulations, though with a reduced administrative workload after plan year end.
*as of March 2024
Partnering with a well-informed, reliable team is crucial for guaranteeing your 401(k) audit in Chesapeake, VA goes as smoothly as possible. With Correct Capital by your side, you’ll be assured that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Chesapeake, VA
Complying with 401(k) audits is both a legal requirement and an opportunity to verify your Chesapeake, VA company's retirement plan stays advantageous to your employees. Correct Capital’s expertise in guiding Chesapeake, VA businesses complete the 401(k) audit reduces the strain, enabling you to concentrate on your operations while preventing penalties for non-compliance.
Contact Correct Capital today to book a meeting and allow us to assist 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 Chesapeake, VA advisor team, contact us online, or call us at 877-930-401(k) to start the process.
