401(k) Audit Services in El Paso, TX. For El Paso, TX businesses that offer retirement plans, completing a 401(k) audit can feel like a challenging process. Between compliance requirements from the Department of Labor (DOL) and IRS, collecting extensive documentation, 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 doesn’t have to feel like a burden and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can cause considerable frustration and are a regulatory requirement. Our team will work with you with every aspect of document collection through making sure Form 5500 is filed correctly and on time. Whether you're navigating your first audit in El Paso, TX, or seeking to simplify a previously inefficient process, 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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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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What is a 401(k) Audit?
A 401(k) audit is an yearly review necessary for El Paso, TX 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 must still undergo an audit if there are 100 who are eligible. 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 evaluates the plan’s financial integrity, ensuring that contributions, withdrawals, and operations are accurately represented.
While necessary for compliance, 401(k) audits can be complex and lengthy. Correct Capital assists El Paso, TX businesses get ready for these audits by aiding in document collection, ensuring comprehension of compliance testing, etc... With an experienced team in your corner, getting through the audit can become a much easier process.
Why are 401(k) Audits Necessary for El Paso, TX Companies?
You are required to undergo a 401(k) audit for multiple purposes, to ensure retirement plans adhere to federal regulations and protect both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: A 401(k) audit guarantees that your 401(k) plan complies with 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 checks if the plan disproportionately benefits 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 employee contributions, withdrawals, or other facets of plan oversight, enabling you to resolve these issues so they don't lead to fines.
- Filing Form 5500: The audit confirms the accurate and on-time filing of Form 5500, a yearly filing that outlines the plan’s financial status, which is required to maintain 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 could lead to penalties.
- Fee Reasonableness: Auditors may review plan fees to confirm they are reasonable and aren’t unnecessarily high for participants. Overpriced fees could lead to compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit ensures that El Paso, TX employers are serving the interests of plan participants, fulfilling their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are aligned 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 El Paso, 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 thorough audit required for most larger 401(k) plans. In a full-scope audit, the independent auditor evaluates all components of the plan, which includes financial statements, conformance 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 are for 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 certified by the financial institution, which can substantially lower the audit’s complexity and cost. This could make it a better alternative for some El Paso, TX businesses, provided they meet the criteria.
The specific audit required is determined by your plan’s particular characteristics, such as the nature of its investments. At Correct Capital, we are able to assist you determine which type of audit your plan needs and ensure you're fully prepared for both audit types.
401(k) Audit Pain Points for El Paso, TX Employers
While 401(k) audits must be conducted to ensure compliance, they often present significant challenges for El Paso, TX employers, particularly those running bigger 401(k) plans. Here are some of the key pain points that businesses face:
- Document Collection and Management: Assembling the necessary paperwork, such as account statements, tax returns, and employee data, can be labor-intensive. Employers may find it challenging to organize and file the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with evolving DOL, IRS, and ERISA regulations can prove difficult. Compliance missteps can result in audit failures, penalties, and expensive fixes in the long run.
- 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: Getting ready for an audit draws HR professionals, business owners, administrators, and others out of their core responsibilities, increasing stress and diverting attention from regular business activities.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 correctly and before the deadline, which is essential to 401(k) compliance. Late submissions can result in 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 El Paso, TX. Whether it’s helping 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 El Paso, TX employers looking to lower the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can ease the process. These plans permit various businesses to join a single 401(k) plan, frequently removing 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 allows El Paso, TX businesses to divide the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs enable unrelated employers to participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure streamlines the regulatory process and cuts costs, making it attractive for El Paso, TX 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. Transitioning into an MEP or PEP may be especially appealing to smaller businesses in El Paso, TX, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right El Paso, TX 401(k) Audit Team
401(k) audits can be daunting, but selecting the proper assistance changes everything. Collaborating with experts that understands both the technical and practical aspects of the audit process reduces the time and pressure you face. Here’s why partnering with the right experts matters:
- 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 pinpoint potential improvements within your plan.
- Compliance Assurance: The right team will help you stay on top of evolving regulations, ensuring that your plan meets all necessary standards.
- 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 assist you in getting ready for your specific audit requirements. Correct Capital is responsible for managing over 37 plans in both small and large companies, with more than $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 take considerable time away from day-to-day operations. The right partner will handle most of the administrative tasks, allowing your HR and finance teams the freedom to concentrate on other tasks. 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 audit specific to your plan is not required, 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
Partnering with a knowledgeable, reliable team is crucial for guaranteeing your 401(k) audit in El Paso, 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 El Paso, TX
Meeting 401(k) audit requirements is both a mandatory process and an opportunity to verify your El Paso, TX company's retirement plan stays advantageous to your employees. Correct Capital’s experience in assisting El Paso, TX businesses complete the 401(k) audit reduces the strain, letting you prioritize your business while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to arrange a session and let us help you ensure your audit goes smoothly and efficiently. Our team of experts will assist with everything from document collection to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our El Paso, TX advisor team, contact us online, or call us at 877-930-401(k) to begin.
