401(k) Audit Services in Dallas, TX. For Dallas, TX businesses offering their employees retirement plans, navigating a 401(k) audit can seem like a challenging process. Between compliance requirements from the Department of Labor (DOL) and IRS, gathering a large amount of paperwork, and ensuring that your plan doesn't disproportionately benefit 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 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 are a regulatory requirement. Our team will work with you with every aspect of document collection to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Dallas, TX, or seeking to simplify a process that's usually a burden, we're here to ensure it’s as smooth and easy 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.
What is a 401(k) Audit?
A 401(k) audit is an annual review required for Dallas, TX companies who have 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 verifies that the retirement plan follows the regulations set by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s overall financial health, ensuring that contributions, distributions, and plan activities are accurately represented.
While necessary for compliance, 401(k) audits can be challenging and lengthy. Correct Capital supports Dallas, TX businesses prepare for these audits by helping with document collection, ensuring comprehension of compliance testing, and other related tasks. With an experienced team by your side, navigating the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Dallas, TX Companies?
You must undergo a 401(k) audit for multiple purposes, ensuring that retirement plans stay in line with federal regulations and safeguard both the employer and employees. Here’s why they are necessary:
- Compliance with DOL and IRS Regulations: A 401(k) audit guarantees 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 ensures that the plan does not unfairly favor higher-paid employees (often referred to as “top-heavy” testing) to ensure the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits can uncover errors in contributions, withdrawals, or additional plan operations, allowing you to correct these issues so they don't lead to fines.
- Filing Form 5500: The audit ensures proper and timely submission of Form 5500, a required document summarizing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions stay within IRS limits for the year, helping to avoid excess contributions that might trigger 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 Dallas, TX employers are acting in the best interest of plan participants, meeting their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Ensuring 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 main categories of 401(k) audits that Dallas, TX employers might come across, 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 most detailed audit required for most larger 401(k) plans. In a full-scope audit, the third-party auditor reviews all aspects of the plan, including 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 ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Previously referred to as 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 qualify for a limited-scope audit. In this type, the auditor is not obligated to audit the investment information verified by the financial institution, which can substantially lower the audit’s complexity and cost. This could make it a better alternative for some Dallas, TX businesses, as long as they meet the criteria.
The specific audit required depends on your plan’s unique features, such as the nature of its investments. At Correct Capital, we will guide you to determine which type of audit your plan requires and make sure you're ready for whichever process is necessary.
401(k) Audit Pain Points for Dallas, TX Employers
While 401(k) audits are necessary for compliance, they frequently pose difficulties for Dallas, TX employers, particularly those running bigger 401(k) plans. Here are some of the key pain points that employers encounter:
- Document Collection and Management: Assembling the necessary paperwork, such as account statements, tax returns, and employee data, can be a lengthy process. Employers often struggle to organize and file the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with evolving DOL, IRS, and ERISA regulations can be challenging. Compliance missteps can result in audit failures, fines, and pricey amendments 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 takes HR professionals, business owners, administrators, and others off of their core responsibilities, adding strain and distracting them from regular business activities.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 accurately and on time, which is a key component of 401(k) compliance. Failing to meet the submission date may lead to penalties and create further issues for the company.
At Correct Capital, we recognize these obstacles and offer customized assistance to streamline the audit procedure in Dallas, TX. From assisting with document collection or verifying adherence to regulations, our team helps take the burden off your shoulders.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For Dallas, TX employers seeking to reduce the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can offer relief. These plans permit various businesses to consolidate into one 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 permits Dallas, TX businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs permit unrelated employers to join a shared 401(k) plan managed by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it attractive for Dallas, TX businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, all while maintaining adherence to regulations. Switching to these types of plans may be highly beneficial for smaller firms in Dallas, TX, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Dallas, TX 401(k) Audit Team
401(k) audits can appear challenging, but selecting the proper assistance can greatly improve the process. Collaborating with experts that is well-versed in both the technicalities and practicalities of the audit process reduces the time and pressure you face. Here’s why having the right experts on your side is important:
- Experience and Expertise: A team of experts is knowledgeable about the nuances 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 will help you stay on top of evolving regulations, making sure your plan complies with all required guidelines.
- 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 currently manages 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 proper team will shoulder a lot of the admin work, allowing your HR and finance teams the ability to address other important matters. 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 separate audit is no longer necessary, you're still obligated to adhere to all the rules and regulations, though with a reduced administrative workload after plan year end.
*as of March 2024
Collaborating with a experienced, reliable team is essential to making sure your 401(k) audit in Dallas, TX goes as smoothly as possible. With Correct Capital supporting you, you’ll feel secure that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Dallas, TX
Adhering to 401(k) audit regulations is both a legal requirement and an opportunity to ensure your Dallas, TX company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s experience in assisting Dallas, TX businesses through the 401(k) audit lightens the load, allowing you to focus on 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 Dallas, TX advisor team, contact us online, or call us at 877-930-401(k) to get started.
