401(k) Audit Services in Huntsville, AL. For Huntsville, AL businesses that offer retirement plans, completing a 401(k) audit can feel like an uphill battle. 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 are many factors to consider. 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 create significant headaches even though they are a regulatory requirement. Our team will work with you for everything from document collection to making sure Form 5500 is filed correctly and on time. Whether you're navigating your first audit in Huntsville, AL, or hoping to optimize a process that's usually a burden, we're here to minimize the hassle. You can book 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 yearly review necessary for Huntsville, AL companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you don’t have more than 100 employees actively enrolled 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 adheres to the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s financial integrity, ensuring that contributions, distributions, and plan activities are accurately represented.
While required for regulatory purposes, 401(k) audits can be complicated and time-consuming. Correct Capital supports Huntsville, AL businesses get ready for these audits by helping with document collection, assisting with understanding compliance testing, as well as other audit processes. With an experienced team in your corner, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Huntsville, AL Companies?
You must undergo a 401(k) audit for multiple purposes, 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 follows 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 does not unfairly favor higher-paid employees (often called “top-heavy” testing) to ensure fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in contributions, distributions, or additional plan operations, allowing you to correct these issues before they result in fines.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a required document detailing the plan’s financial status, which is required to maintain compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions stay within IRS limits for the year, helping to avoid 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. Overpriced fees could lead to compliance concerns and affect how employees' investments and savings perform.
- Fiduciary Oversight: The audit confirms that Huntsville, AL employers are working to benefit plan participants, satisfying their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are in compliance 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 Huntsville, AL employers may encounter, 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 more comprehensive audit necessary for most larger 401(k) plans. In a full-scope audit, the third-party auditor examines every part of the plan, which includes financial statements, adherence to 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 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 does not need to audit the investment information certified by the financial institution, which can significantly reduce the audit’s complexity and cost. This could make it a better alternative for some Huntsville, AL businesses, provided they meet the criteria.
The specific audit required depends on your plan’s specific details, such as the nature of its investments. At Correct Capital, we will guide you to determine which type of audit your plan needs and make sure you're ready for both audit types.
401(k) Audit Pain Points for Huntsville, AL Employers
While 401(k) audits are required to meet legal obligations, they can create major obstacles for Huntsville, AL employers, notably those managing larger plans. Here are some of the key pain points that employers encounter:
- Document Collection and Management: Gathering the necessary paperwork, such as account statements, tax returns, and employee data, can be time-consuming. Employers may find it challenging to sort through and submit the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with shifting DOL, IRS, and ERISA regulations can be challenging. Compliance missteps can lead to audit failures, penalties, and costly corrections down the line.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy requires careful compliance checks and can lead to additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit takes 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 properly and punctually, which plays a critical role in 401(k) compliance. Failing to meet the submission date could cause penalties and complicate things for the company.
At Correct Capital, we understand these challenges and provide tailored support to make the audit process in Huntsville, AL smoother. Be it document collection or confirming conformity 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 Huntsville, AL employers hoping to ease the workload of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can provide solutions. These plans permit various businesses to join a single 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, reducing the cost and complexity of managing and auditing individual plans. This setup permits Huntsville, AL businesses to share the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs permit unrelated employers to enter a unified 401(k) plan managed by a pooled plan provider (PPP). This structure makes meeting regulations easier and reduces costs, making it appealing for Huntsville, AL businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, while still ensuring compliance with federal regulations. Switching to these types of plans may be highly beneficial for smaller firms in Huntsville, AL, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Huntsville, AL 401(k) Audit Team
401(k) audits can appear challenging, but choosing the right support can make all the difference. Working with a team that understands both the technical and practical aspects of the audit process can save you significant time and stress. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A skilled team understands the complexities of 401(k) audits, encompassing full-scope and limited-scope audits. We can guide you through the documentation process and pinpoint potential improvements within your plan.
- Compliance Assurance: The right team ensures you keep up with evolving regulations, making sure your plan complies with all required guidelines.
- Tailored Support: Every 401(k) plan is different. An experienced team will partner 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, 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 right partner will take on much of the administrative burden, enabling your HR and finance teams to focus on other priorities. Correct Capital simplifies the entire process, reducing the pressure on your internal team.
- MEPs and PEPs Expertise: For businesses enrolled in an MEP or PEP, while an individual plan audit is not required, you're still responsible for following all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Collaborating with a knowledgeable, reliable team is essential to making sure your 401(k) audit in Huntsville, AL 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 Huntsville, AL
Complying with 401(k) audits is both a legal requirement and an opportunity to ensure your Huntsville, AL company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s knowledge of helping Huntsville, AL businesses complete the 401(k) audit helps ease the burden, allowing you to focus on your business while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to schedule a consultation and we'll guide you ensure your audit goes smoothly and efficiently. Our team of experts will support you with everything, including document collection through to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Huntsville, AL advisor team, contact us online, or call us at 877-930-401(k) to begin.
