401(k) Audit Services in Grand Prairie, TX. For Grand Prairie, TX businesses that offer retirement plans, completing a 401(k) audit can feel like a daunting task. Between regulation from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan doesn't favor higher-paid employees, there are many factors to consider. However, with the right support, the 401(k) audit doesn’t have to feel like a burden 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 mandatory. Our team will assist you with every aspect of document collection to meeting Form 5500 deadlines. Whether you're preparing for your first audit in Grand Prairie, TX, or looking to streamline a process that's usually a burden, 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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What is a 401(k) Audit?
A 401(k) audit is an annual review mandated for Grand Prairie, TX companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively contributing to the plan, you still need an audit if there are 100 who have the option to participate if they wanted. The audit ensures that the retirement plan follows the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s overall financial health, ensuring that employee contributions, withdrawals, and operations are faithfully recorded.
While required for regulatory purposes, 401(k) audits can be challenging and time-consuming. Correct Capital helps Grand Prairie, TX businesses navigate these audits by assisting with document collection, ensuring comprehension of compliance testing, and other related tasks. With the right support, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Grand Prairie, TX Companies?
You are required to undergo a 401(k) audit for several reasons, ensuring that 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: The purpose of audits is to confirm that your 401(k) plan adheres to all legal requirements set by the Department of Labor (DOL) and the IRS, with emphasis under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit checks if the plan disproportionately benefits higher-paid employees (often called “top-heavy” testing) to guarantee fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, distributions, or additional plan operations, enabling you to resolve these issues to avoid fines.
- Filing Form 5500: The audit confirms the accurate and on-time filing of Form 5500, an annual report that outlines the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions remain within IRS contribution limits, reducing the risk of excess contributions that may result in 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 affect how employees' investments and savings perform.
- Fiduciary Oversight: The audit confirms that Grand Prairie, TX employers are working to benefit plan participants, meeting their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Confirming 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 Grand Prairie, TX employers could face, depending on the size and complexity 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, 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: Formerly known 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 be eligible for a limited-scope audit. In this type, the auditor is not required 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 preferable choice for some Grand Prairie, TX businesses, provided they meet the criteria.
The specific audit required is determined by your plan’s unique features, such as the nature of its investments. At Correct Capital, we are able to assist you understand which type of audit your plan is subject to and make sure you're ready for whichever process is necessary.
401(k) Audit Pain Points for Grand Prairie, TX Employers
While 401(k) audits are required to meet legal obligations, they frequently pose difficulties for Grand Prairie, TX employers, especially those overseeing more substantial retirement plans. Below are several common challenges that businesses face:
- Document Collection and Management: Assembling the right documents, such as account statements, tax returns, and employee data, can be time-consuming. Employers frequently have difficulties to arrange and file the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with evolving DOL, IRS, and ERISA regulations is difficult. Compliance oversights can cause audit failures, fines, and pricey amendments down the line.
- Discrimination Testing: Ensuring that the plan doesn't favor higher earning employees involves detailed compliance reviews and can result in additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit draws HR professionals, business owners, administrators, and others away from their core responsibilities, increasing stress and distracting them from regular business activities.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 properly and punctually, which is essential to 401(k) compliance. Failing to meet the submission date could cause 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 Grand Prairie, TX. Be it 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 Grand Prairie, TX employers hoping to ease the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can ease the process. These plans allow unrelated employers to participate in a unified 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans pool together several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup enables Grand Prairie, TX businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs allow unrelated employers to participate in a collective 401(k) plan overseen by a pooled plan provider (PPP). This structure makes meeting regulations easier and cuts costs, making it a desirable option for Grand Prairie, TX 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 highly beneficial for smaller firms in Grand Prairie, TX, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Grand Prairie, TX 401(k) Audit Team
401(k) audits can seem difficult, but selecting the proper assistance can make all the difference. Partnering with professionals that is well-versed in both the technicalities and practicalities 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 team of experts understands 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 helps you remain up to date with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will partner with you to grasp the unique needs of your plan and assist you in getting ready for your specific audit requirements. Correct Capital currently manages 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: Getting ready for a 401(k) audit can distract you significantly from day-to-day operations. The ideal support will shoulder a lot of the admin work, giving 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 enrolled in an MEP or PEP, while an separate audit is no longer mandated, you're still responsible for following all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Working with a experienced, reliable team is key to ensuring your 401(k) audit in Grand Prairie, TX is as painless as possible. With Correct Capital supporting you, you’ll have the confidence that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Grand Prairie, TX
Complying with 401(k) audits is both a mandatory process and an opportunity to ensure your Grand Prairie, TX company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s experience in assisting Grand Prairie, TX businesses through the 401(k) audit reduces the strain, allowing you to focus on your business while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to book a meeting and let us help you get ready for a streamlined, effective audit. Our team of experts will support you with everything, including document collection to compliance checks, making sure your plan is set up for success. You can schedule a meeting with a member of our Grand Prairie, TX advisor team, contact us online, or call us at 877-930-401(k) to begin.
