401(k) Audit Services in Houston, TX. For Houston, TX businesses that offer retirement plans, navigating a 401(k) audit can seem like a challenging process. Between regulation from the Department of Labor (DOL) and IRS, collecting extensive documentation, and ensuring that your plan isn’t “top-heavy”, it can be overwhelming. 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 create significant headaches and are a regulatory requirement. Our team will work with you for everything from document collection through making sure Form 5500 is filed correctly and on time. Whether you're navigating your first audit in Houston, TX, or seeking to simplify a previously cumbersome process, we're here to minimize the hassle. 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.
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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 annual review mandated for Houston, 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 must still undergo an audit if there are 100 who have the option to participate if they wanted. The audit confirms that the retirement plan follows the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s overall financial health, ensuring that contributions, distributions, and operations are properly documented.
While necessary for compliance, 401(k) audits can be complicated and demanding. Correct Capital helps Houston, TX businesses prepare for these audits by assisting with document collection, helping clarify compliance testing, and other related tasks. With an experienced team in your corner, getting through the audit can become a much easier process.
Why are 401(k) Audits Necessary for Houston, TX Companies?
You must undergo a 401(k) audit for a variety of reasons, ensuring that retirement plans stay in line with federal regulations and protect both the employer and employees. Here’s why they are necessary:
- Compliance with DOL and IRS Regulations: Audits ensure 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 checks if the plan isn't overly advantageous to higher-paid employees (often called “top-heavy” testing) to guarantee the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in contributions, distributions, or other facets of plan oversight, enabling you to resolve these issues before they result in penalties.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, an annual report detailing 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 limits for the year, preventing excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to ensure they are reasonable and not overly expensive for participants. Excessive fees may prompt compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Houston, TX employers are acting in the best interest of plan participants, meeting their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is a vital part of the audit.
Types of 401(k) Audits
There are two kinds of 401(k) audits that Houston, 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 most detailed audit required for most larger 401(k) plans. In a full-scope audit, the external auditor reviews all aspects of the plan, which includes financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines supporting documentation for contributions, withdrawls, and other transactions to verify that everything is accurate and in compliance.
- Section 103(a)(3)(C)) Audit: Previously called 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 be eligible 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 significantly reduce the audit’s complexity and cost. This may make it a better alternative for some Houston, TX businesses, as long as they meet the criteria.
The type of audit you need is based on your plan’s specific details, such as the nature of its investments. At Correct Capital, we are able to assist you figure out which type of audit your plan needs and ensure you're fully prepared for whichever process is necessary.
401(k) Audit Pain Points for Houston, TX Employers
While 401(k) audits are necessary for compliance, they often present significant challenges for Houston, TX employers, notably those overseeing more substantial retirement plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Collecting the required files, such as account statements, tax returns, and employee data, can be time-consuming. Employers may find it challenging to organize and submit the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with changing DOL, IRS, and ERISA regulations can be challenging. Compliance oversights can lead to audit failures, sanctions, and pricey amendments in the long run.
- Discrimination Testing: Verifying 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: Getting ready for an audit pulls HR professionals, business owners, administrators, and others off of their core responsibilities, heightening pressure and shifting focus from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 accurately and on time, which is essential to 401(k) compliance. Missing the deadline can result in penalties and create further issues for the company.
At Correct Capital, we recognize these obstacles and deliver personalized help to streamline the audit procedure in Houston, TX. Whether it’s helping with 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 Houston, TX employers seeking to reduce the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can provide solutions. These plans enable different employers to join a single 401(k) plan, frequently removing employer-specific audits.
- Multiple Employer Plans (MEP): These plans consolidate several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup allows Houston, TX businesses to share the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs enable unrelated employers to join a shared 401(k) plan administered by a pooled plan provider (PPP). This structure streamlines the regulatory process and reduces costs, making it a desirable option for Houston, 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 especially appealing to smaller businesses in Houston, TX, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Houston, TX 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place can greatly improve the process. Partnering with professionals that has a firm grasp of both technical and practical elements 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 team of experts will be familiar with the details of 401(k) audits, including both full-scope and limited-scope audits. We help you navigate 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 partner with you to identify the unique needs of your plan and help you prepare 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: Getting ready for a 401(k) audit can distract you significantly from day-to-day operations. The proper team will handle most of the administrative tasks, allowing your HR and finance teams to focus on other priorities. Correct Capital simplifies the entire process, easing the load for your internal team.
- MEPs and PEPs Expertise: For businesses enrolled 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, just with less administrative burdens after plan year end.
*as of March 2024
Working with a knowledgeable, reliable team is essential to making sure your 401(k) audit in Houston, TX runs efficiently and stress-free. With Correct Capital by your side, 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 Houston, TX
Adhering to 401(k) audit regulations is both a mandatory process and an opportunity to ensure your Houston, TX company's retirement plan stays advantageous to your employees. Correct Capital’s expertise in guiding Houston, TX businesses complete 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 book a meeting and let us help you ensure your audit goes smoothly and efficiently. Our team of experts will help with all aspects from document collection to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Houston, TX advisor team, contact us online, or call us at 877-930-401(k) to begin.
