401(k) Audit Services in Colorado Springs, CO. For Colorado Springs, CO businesses offering their employees 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 isn’t “top-heavy”, it can be overwhelming. However, with the right support, the 401(k) audit can be made much easier and interfere with your company’s daily operations.
At Correct Capital, we understand that 401(k) audits can be a major source of stress even though they cannot be avoided. Our team will assist you with every aspect of document collection through meeting Form 5500 deadlines. Whether you're preparing for your first audit in Colorado Springs, CO, or hoping to optimize a process that's usually a burden, we're here to ensure it’s as smooth and easy 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 required for Colorado Springs, CO companies with more than 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 have the option to participate if they wanted. The audit confirms that the retirement plan complies with the regulations established 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, withdrawals, and operations are faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be challenging and time-consuming. Correct Capital helps Colorado Springs, CO businesses navigate these audits by helping with document collection, assisting with understanding compliance testing, and other related tasks. With the right support, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Colorado Springs, CO Companies?
You need to undergo a 401(k) audit for several reasons, to ensure retirement plans stay in line with federal regulations and safeguard both the employer and employees. Here’s why you need them:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm that your 401(k) plan adheres to 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) to guarantee fairness across all participants.
- Identifying Operational Issues: Audits often expose 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 confirms proper and timely submission of Form 5500, a yearly filing detailing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit verifies that employer and employee contributions do not exceed IRS limits for the year, reducing the risk of excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may examine plan fees to ensure they are reasonable and aren’t unnecessarily high for participants. Overpriced fees could lead to compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Colorado Springs, CO employers are acting in the best interest of plan participants, fulfilling their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are in compliance 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 Colorado Springs, CO employers may encounter, 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 thorough audit mandated for most larger 401(k) plans. In a full-scope audit, the third-party auditor examines every part of the plan, including financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines supporting documentation for contributions, distributions, and other transactions to confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Formerly known as 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 required to audit the investment information endorsed by the financial institution, which can greatly lessen the audit’s complexity and cost. This can make it a better alternative for some Colorado Springs, CO businesses, if they satisfy the criteria.
The kind of audit your plan needs depends on your plan’s particular characteristics, including the nature of its investments. At Correct Capital, we are able to assist you figure out which type of audit your plan is subject to and help you be well-prepared for either process.
401(k) Audit Pain Points for Colorado Springs, CO Employers
While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Colorado Springs, CO employers, especially those managing larger plans. Below are several common challenges that businesses face:
- Document Collection and Management: Gathering the right documents, such as account statements, tax returns, and employee data, can be a lengthy process. Employers may find it challenging to sort through and submit the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with evolving DOL, IRS, and ERISA regulations can be challenging. Compliance errors can result in audit failures, penalties, and expensive fixes down the line.
- Discrimination Testing: Making sure that the plan doesn't favor higher earning employees demands thorough checks for compliance and can result in additional documentation and reporting.
- Time and Resource Demands: Audit preparation draws HR professionals, business owners, administrators, and others away from their core responsibilities, increasing stress and shifting focus from regular business activities.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 properly and punctually, which plays a critical role in 401(k) compliance. Late submissions may lead to penalties and cause additional problems for the company.
At Correct Capital, we recognize these obstacles and offer customized assistance to streamline the audit procedure in Colorado Springs, CO. Whether it’s helping 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 Colorado Springs, CO employers hoping to ease the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can ease the process. These plans allow unrelated employers to join a single 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, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup allows Colorado Springs, CO businesses to share the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs permit unrelated employers to participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure makes meeting regulations easier and cuts costs, making it appealing for Colorado Springs, CO businesses looking to streamline 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 particularly attractive for small companies in Colorado Springs, CO, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Colorado Springs, CO 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place changes everything. 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 is knowledgeable about the complexities of 401(k) audits, covering both full-scope and limited-scope audits. We help you navigate the documentation process and highlight areas for enhancement within your plan.
- Compliance Assurance: The right team helps you remain up to date with 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 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, giving us the expertise to handle any company 401(k) plan.
- Saving Time and Resources: Audit preparation can take considerable time away 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 helps streamline the process, taking the stress off your internal team.
- MEPs and PEPs Expertise: For businesses enrolled in an MEP or PEP, while an audit specific to your plan is no longer necessary, 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 knowledgeable, reliable team is essential to making sure your 401(k) audit in Colorado Springs, CO is as painless as possible. With Correct Capital by your side, 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 Colorado Springs, CO
Meeting 401(k) audit requirements is both a mandatory process and an opportunity to ensure your Colorado Springs, CO company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s knowledge of helping Colorado Springs, CO businesses navigate the 401(k) audit reduces the strain, letting you prioritize your business while avoiding fines 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 support you with everything, including document collection to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Colorado Springs, CO advisor team, contact us online, or call us at 877-930-401(k) to get started.
