401(k) Audit Services in Corpus Christi, TX. For Corpus Christi, TX businesses that offer retirement plans, completing a 401(k) audit can seem like a challenging process. 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 does not need to disrupt your business 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 for everything from document collection to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Corpus Christi, TX, 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 ask for a meeting with a member of our advisor team, fill out our online form, or call us at 877-930-401(k) to get started.
What is a 401(k) Audit?
A 401(k) audit is an annual review necessary for Corpus Christi, TX 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 must still undergo an audit if there are 100 who are eligible. The audit confirms that the retirement plan complies with the regulations mandated 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, withdrawals, and operations are accurately represented.
While necessary for compliance, 401(k) audits can be challenging and time-consuming. Correct Capital helps Corpus Christi, TX businesses get ready for these audits by helping with document collection, assisting with understanding compliance testing, etc... With an experienced team by your side, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Corpus Christi, TX Companies?
You are required to undergo a 401(k) audit for multiple purposes, to ensure retirement plans adhere to federal regulations and safeguard both the employer and employees. Here’s why you need them:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan follows all legal requirements established 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 isn't overly advantageous to higher-paid employees (often known as “top-heavy” testing) to ensure the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, distributions, or other aspects of plan management, enabling you to resolve these issues so they don't lead to penalties.
- Filing Form 5500: The audit ensures proper and timely submission of Form 5500, a yearly filing that outlines the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit verifies that employer and employee contributions stay within IRS contribution limits, reducing the risk of excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may examine plan fees to verify they are reasonable and not overly expensive for participants. High fees can raise compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Corpus Christi, TX employers are working to benefit plan participants, meeting 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 one of the most important parts of the audit.
Types of 401(k) Audits
There are two primary types of 401(k) Audits that Corpus Christi, TX employers could face, based on the specific details 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 mandated for most larger 401(k) plans. In a full-scope audit, the independent auditor reviews all aspects 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, distributions, and other transactions to verify that everything is accurate and in compliance.
- Section 103(a)(3)(C)) Audit: Formerly known as 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 qualify for a limited-scope audit. In this type, the auditor is not obligated 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 Corpus Christi, TX businesses, provided they meet the criteria.
The kind of audit your plan needs depends on your plan’s specific details, including 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 whichever process is necessary.
401(k) Audit Pain Points for Corpus Christi, TX Employers
While 401(k) audits are necessary for compliance, they frequently pose difficulties for Corpus Christi, TX employers, especially those managing larger plans. Below are several common challenges that employers encounter:
- Document Collection and Management: Collecting the necessary paperwork, such as account statements, tax returns, and employee data, can be a lengthy process. Employers may find it challenging to sort through and deliver 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 errors can lead to audit failures, penalties, and expensive fixes later on.
- Discrimination Testing: Making sure 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: Audit preparation takes HR professionals, business owners, administrators, and others off of their core responsibilities, adding strain and shifting focus from regular business activities.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 properly and punctually, which is a key component of 401(k) compliance. Failing to meet the submission date can result in penalties and complicate things for the company.
At Correct Capital, we recognize these obstacles and offer customized assistance to make the audit process in Corpus Christi, TX smoother. 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 Corpus Christi, TX employers seeking to reduce the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can provide solutions. These plans allow unrelated employers to join a single 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans pool together several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup allows Corpus Christi, TX businesses to divide the administrative responsibilities and possibly eliminate 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 streamlines the regulatory process and lowers expenses, making it attractive for Corpus Christi, TX businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while still ensuring compliance with federal regulations. Moving to one of these plans may be especially appealing to smaller businesses in Corpus Christi, TX, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Corpus Christi, TX 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 reduces the time and pressure you face. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A team of experts is knowledgeable about the complexities of 401(k) audits, covering both full-scope and limited-scope audits. We can guide you through the documentation process and pinpoint potential improvements within your plan.
- Compliance Assurance: The right team ensures you keep up with evolving regulations, ensuring that your plan meets all necessary standards.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will collaborate with you to understand 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, which allows us to understand the nuances of any company 401(k) plan.
- Saving Time and Resources: Audit preparation can distract you significantly from day-to-day operations. The ideal support will shoulder a lot of the admin work, 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 participating in an MEP or PEP, while an audit specific to your plan is no longer mandated, you're still required to comply with all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Partnering with a knowledgeable, reliable team is essential to making sure your 401(k) audit in Corpus Christi, TX goes as smoothly as possible. With Correct Capital as your partner, 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 Corpus Christi, TX
Adhering to 401(k) audit regulations is both a legal requirement and an opportunity to ensure your Corpus Christi, TX company's retirement plan stays advantageous to your employees. Correct Capital’s expertise in guiding Corpus Christi, TX businesses complete the 401(k) audit reduces the strain, letting you prioritize your business while preventing penalties for non-compliance.
Contact Correct Capital today to schedule a consultation and let us help you ensure your audit goes smoothly and efficiently. Our team of experts will assist with everything from document collection through to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Corpus Christi, TX advisor team, contact us online, or call us at 877-930-401(k) to get started.
