401(k) Audit Services in Chicago, IL. For Chicago, IL businesses that offer retirement plans, navigating a 401(k) audit can seem like a daunting task. 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 doesn’t have to feel like a burden and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can be a major source of stress and cannot be avoided. 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 navigating your first audit in Chicago, IL, or hoping to optimize a process that's usually a burden, 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.
Schedule a Meeting With an Advisor Today
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.
Schedule a 15-Minute Introductory Call
What is a 401(k) Audit?
A 401(k) audit is an yearly review necessary for Chicago, IL companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you don’t have more than 100 employees actively contributing to the plan, you are still required to have an audit if there are 100 who have the option to participate if they wanted. The audit verifies that the retirement plan follows the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s overall financial health, ensuring that contributions, distributions, and plan activities are accurately represented.
While necessary to meet legal requirements, 401(k) audits can be complex and time-consuming. Correct Capital supports Chicago, IL businesses navigate 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 far more manageable task.
Why are 401(k) Audits Necessary for Chicago, IL Companies?
You need to undergo a 401(k) audit for multiple purposes, 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: Audits ensure that your 401(k) plan complies with all legal requirements established 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 disproportionately benefits higher-paid employees (often known as “top-heavy” testing) in order to promote the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in contributions, withdrawals, or additional plan operations, enabling you to resolve these issues before they result in penalties.
- Filing Form 5500: The audit confirms the accurate and on-time filing of Form 5500, a required document 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 stay within IRS limits for the year, reducing the risk of excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may review plan fees to ensure they are reasonable and aren’t unnecessarily high for participants. Overpriced fees could lead to compliance concerns and hurt how employees' investments and savings perform.
- Fiduciary Oversight: The audit ensures that Chicago, IL employers are serving the interests of plan participants, satisfying their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Confirming that the plan's documents, policies, and operational practices are consistent 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 Chicago, IL employers may encounter, 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 most detailed audit required for most larger 401(k) plans. In a full-scope audit, the third-party auditor evaluates all components of the plan, such as financial statements, conformance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates supporting documentation for contributions, distributions, 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 held 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 does not need 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 more attractive option for some Chicago, IL businesses, provided they meet the criteria.
The specific audit required depends on your plan’s specific details, like the nature of its investments. At Correct Capital, we are able to assist you figure out which type of audit your plan requires and help you be well-prepared for both audit types.
401(k) Audit Pain Points for Chicago, IL Employers
While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Chicago, IL employers, especially those managing larger plans. These are some of the major issues that companies deal with:
- Document Collection and Management: Collecting the necessary paperwork, such as account statements, tax returns, and employee data, can be time-consuming. Employers frequently have difficulties to organize and submit the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with evolving DOL, IRS, and ERISA regulations can prove difficult. Compliance errors can result in audit failures, fines, and expensive fixes in the long run.
- Discrimination Testing: Verifying that the plan doesn't favor higher earning employees requires careful compliance checks and can lead to additional documentation and reporting.
- Time and Resource Demands: Audit preparation pulls HR professionals, business owners, administrators, and others off of their core responsibilities, adding strain and shifting focus from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 accurately and on time, which is essential to 401(k) compliance. Missing the deadline may lead to penalties and cause additional problems for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to make the audit process in Chicago, IL less stressful. From assisting with document collection or ensuring compliance with 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 Chicago, IL employers seeking to reduce the workload of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can ease the process. These plans permit various businesses to participate in a unified 401(k) plan, reducing the need for 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 permits Chicago, IL businesses to divide 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 enter a unified 401(k) plan administered by a pooled plan provider (PPP). This structure simplifies compliance and reduces costs, making it a desirable option for Chicago, IL 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 highly beneficial for smaller firms in Chicago, IL, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Chicago, IL 401(k) Audit Team
401(k) audits can seem difficult, but having the right team in place changes everything. Partnering with professionals that has a firm grasp of both technical and practical elements of the audit process helps you avoid unnecessary delays and anxiety. Here’s why having the right experts on your side is important:
- Experience and Expertise: A skilled team is knowledgeable about the complexities of 401(k) audits, covering both full-scope and limited-scope audits. We will assist you with the documentation process and help identify areas of improvement within your plan.
- Compliance Assurance: The right team helps you remain up to date with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Every 401(k) plan is different. An experienced team will partner with you to grasp the unique needs of your plan and guide you in preparing for your specific audit requirements. Correct Capital handles more than 37 plans in both small and large companies, and represents 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: Preparing for a 401(k) audit can consume a lot of time from day-to-day operations. The proper team will handle most of the administrative tasks, enabling your HR and finance teams to focus on other priorities. Correct Capital makes the process smoother, reducing the pressure on 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 no longer necessary, you're still required to comply with all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Collaborating with a well-informed, reliable team is key to ensuring your 401(k) audit in Chicago, IL runs efficiently and stress-free. With Correct Capital supporting you, you’ll be assured that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in Chicago, IL
Complying with 401(k) audits is both a mandatory process and an opportunity to ensure your Chicago, IL company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s experience in assisting Chicago, IL businesses through the 401(k) audit helps ease the burden, allowing you to focus on your business while preventing penalties for non-compliance.
Contact Correct Capital today to arrange a session and we'll guide you get ready for a streamlined, effective audit. Our team of experts will help with all aspects from document collection to compliance checks, making sure your plan is set up for success. You can schedule a meeting with a member of our Chicago, IL advisor team, contact us online, or call us at 877-930-401(k) to get started.