401(k) Audit Services in Huntington Beach, CA. For Huntington Beach, CA businesses offering their employees retirement plans, navigating a 401(k) audit can feel like a challenging process. Between compliance requirements 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 cause considerable frustration even though they cannot be avoided. 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 Huntington Beach, CA, or hoping to optimize 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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What is a 401(k) Audit?
A 401(k) audit is an yearly review required for Huntington Beach, CA companies who have more than 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively contributing to the plan, you must still undergo an audit if there are 100 who have the option to participate if they wanted. The audit verifies that the retirement plan complies with 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 employee contributions, distributions, and operations are properly documented.
While necessary to meet legal requirements, 401(k) audits can be complex and demanding. Correct Capital supports Huntington Beach, CA businesses prepare for these audits by helping with document collection, assisting with understanding compliance testing, etc... With the right support, handling the audit process can become a much easier process.
Why are 401(k) Audits Necessary for Huntington Beach, CA Companies?
You must 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 you need them:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan adheres to all legal requirements set by the Department of Labor (DOL) and the IRS, particularly under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit ensures that the plan disproportionately benefits higher-paid employees (often referred to as “top-heavy” testing) to ensure fairness across all participants.
- Identifying Operational Issues: Audits can uncover errors in contributions, withdrawals, or other aspects of plan management, allowing you to correct these issues to avoid penalties.
- Filing Form 5500: The audit guarantees proper and timely submission 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 verifies that employer and employee contributions stay within IRS limits for the year, preventing excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may examine plan fees to confirm they are reasonable and aren’t unnecessarily high for participants. High fees can raise compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit confirms that Huntington Beach, CA employers are acting in the best interest of plan participants, fulfilling their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Confirming that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is a key part of the audit.
Types of 401(k) Audits
There are two main categories of 401(k) audits that Huntington Beach, CA employers may encounter, depending on factors such as the size and nature of their plan. These types of audits are determined by the structure of the retirement plan, as well as its investment and participant details.
- Full-Scope Audit: This is the thorough audit necessary for most larger 401(k) plans. In a full-scope audit, the third-party auditor evaluates all components 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 ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Previously called a "Limited Scope Audit," these apply to plans with investments overseen by a qualified, regulated financial institution (such as a bank or insurance company). The employer may take advantage of a limited-scope audit. In this type, the auditor does not need to audit the investment information verified by the financial institution, which can greatly lessen the audit’s complexity and cost. This could make it a preferable choice for some Huntington Beach, CA businesses, if they satisfy the criteria.
The kind of audit your plan needs is based on your plan’s specific details, like the nature of its investments. At Correct Capital, we are able to assist you determine which type of audit your plan is subject to and make sure you're ready for either process.
401(k) Audit Pain Points for Huntington Beach, CA Employers
While 401(k) audits are necessary for compliance, they frequently pose difficulties for Huntington Beach, CA employers, especially those overseeing more substantial retirement plans. Below are several common challenges that businesses face:
- Document Collection and Management: Collecting the necessary paperwork, such as account statements, tax returns, and employee data, can be labor-intensive. Employers often struggle to organize and submit the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with evolving DOL, IRS, and ERISA regulations can prove difficult. Compliance missteps can lead to audit failures, sanctions, and pricey amendments down the line.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy demands thorough checks for compliance and can lead to additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit takes 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 struggle to file Form 5500 correctly and before the deadline, which is essential to 401(k) compliance. Missing the deadline may lead to penalties and cause additional problems for the company.
At Correct Capital, we recognize these obstacles and provide tailored support to make the audit process in Huntington Beach, CA smoother. Whether it’s helping with document collection or ensuring compliance 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 Huntington Beach, CA employers seeking to reduce the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can provide solutions. These plans permit various businesses to join a single 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans consolidate several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup permits Huntington Beach, CA businesses to distribute the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs permit unrelated employers to enter a unified 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 Huntington Beach, CA businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while ensuring regulatory compliance. Switching to these types of plans may be highly beneficial for smaller firms in Huntington Beach, CA, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Huntington Beach, CA 401(k) Audit Team
401(k) audits can seem difficult, but selecting the proper assistance changes everything. Partnering with professionals that is well-versed in both the technicalities and practicalities 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 skilled team understands 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: Every 401(k) plan is different. An experienced team will collaborate with you to understand the unique needs of your plan and help you prepare 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, giving us the expertise to handle any company 401(k) plan.
- Saving Time and Resources: Preparing for a 401(k) audit can consume a lot of time from day-to-day operations. The right partner will take on much of the administrative burden, allowing your HR and finance teams the freedom to concentrate on other tasks. 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 individual plan audit is no longer mandated, you're still required to comply with all the rules and regulations, though with a reduced administrative workload after plan year end.
*as of March 2024
Partnering with a experienced, reliable team is crucial for guaranteeing your 401(k) audit in Huntington Beach, CA goes as smoothly as possible. With Correct Capital by your side, you’ll feel secure that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in Huntington Beach, CA
Adhering to 401(k) audit regulations is both a mandatory process and an opportunity to ensure your Huntington Beach, CA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s expertise in guiding Huntington Beach, CA businesses through 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 schedule a consultation and allow us to assist you get ready for a streamlined, effective audit. Our team of experts will support you with everything, including document collection through to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Huntington Beach, CA advisor team, contact us online, or call us at 877-930-401(k) to begin.
