401(k) Audit Services in Jersey City, NJ. For Jersey City, NJ businesses offering their employees retirement plans, completing a 401(k) audit can seem like an uphill battle. Between regulation from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan doesn't disproportionately benefit higher-paid employees, it can be overwhelming. However, with the right support, the 401(k) audit doesn’t have to feel like a burden and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can cause considerable frustration even though they are a regulatory requirement. Our team will assist you with every aspect of document collection to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Jersey City, NJ, or looking to streamline a previously cumbersome 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.
What is a 401(k) Audit?
A 401(k) audit is an yearly review necessary for Jersey City, NJ companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively enrolled in the plan, you are still required to have an audit if there are 100 who are eligible. The audit ensures that the retirement plan complies with the regulations established 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, distributions, and plan activities are accurately represented.
While necessary for compliance, 401(k) audits can be complex and time-consuming. Correct Capital helps Jersey City, NJ businesses navigate these audits by aiding in document collection, assisting with understanding compliance testing, etc... With an experienced team by your side, handling the audit process can become a far more manageable task.
Why are 401(k) Audits Necessary for Jersey City, NJ Companies?
You are required to undergo a 401(k) audit for several reasons, to ensure retirement plans stay in line with federal regulations and safeguard both the employer and employees. Here’s why they are necessary:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm that your 401(k) plan adheres to all legal requirements mandated by the Department of Labor (DOL) and the IRS, particularly under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit verifies whether the plan disproportionately benefits higher-paid employees (often referred to as “top-heavy” testing) in order to promote fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in contributions, distributions, or additional plan operations, allowing you to correct these issues to avoid fines.
- Filing Form 5500: The audit ensures proper and timely submission of Form 5500, an annual report detailing 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 remain within IRS limits for the year, reducing the risk of excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may review plan fees to verify they are reasonable and don’t pose an excessive cost for participants. High fees can raise compliance concerns and negatively impact the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Jersey City, NJ employers are serving the interests of 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 consistent 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 Jersey City, NJ employers might come across, 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 necessary for most larger 401(k) plans. In a full-scope audit, the third-party auditor evaluates all components of the plan, which includes financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor reviews supporting documentation for contributions, distributions, and other transactions to ensure accuracy and compliance.
- 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 take advantage of 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 Jersey City, NJ businesses, as long as they meet the criteria.
The specific audit required depends on your plan’s unique features, like the nature of its investments. At Correct Capital, we can help you determine which type of audit your plan needs and ensure you're fully prepared for whichever process is necessary.
401(k) Audit Pain Points for Jersey City, NJ Employers
While 401(k) audits are necessary for compliance, they often present significant challenges for Jersey City, NJ employers, notably those running bigger 401(k) plans. These are some of the major issues 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 may find it challenging to sort through and submit the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with evolving DOL, IRS, and ERISA regulations can prove difficult. Compliance oversights can lead to audit failures, penalties, and costly corrections in the long run.
- Discrimination Testing: Verifying that the plan doesn't favor higher earning employees requires careful compliance checks and can necessitate additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit pulls HR professionals, business owners, administrators, and others away from their core responsibilities, heightening pressure and shifting focus from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 properly and punctually, which is essential to 401(k) compliance. Late submissions may lead to penalties and cause additional problems for the company.
At Correct Capital, we recognize these obstacles and deliver personalized help to make the audit process in Jersey City, NJ more efficient. Whether it’s helping with 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 Jersey City, NJ employers looking to lower the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can ease the process. These plans allow unrelated employers to consolidate into one 401(k) plan, frequently removing employer-specific audits.
- Multiple Employer Plans (MEP): These plans combine several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup allows Jersey City, NJ businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs allow unrelated employers to participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure simplifies compliance and lowers expenses, making it appealing for Jersey City, NJ businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while still ensuring compliance with federal regulations. Moving to one of these plans may be highly beneficial for smaller firms in Jersey City, NJ, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Jersey City, NJ 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place changes everything. Collaborating with experts that is well-versed in both the technicalities and practicalities 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, including 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 will help you stay on top of evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Every 401(k) plan is different. An experienced team will partner with you to understand the unique needs of your plan and guide you in preparing for your specific audit requirements. Correct Capital handles more than 37 plans in both small and large companies, and represents 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: Preparing for a 401(k) audit can consume a lot of time from day-to-day operations. The ideal support will handle most of the administrative tasks, enabling your HR and finance teams the ability to address other important matters. Correct Capital makes the process smoother, reducing the pressure on your internal team.
- MEPs and PEPs Expertise: For businesses participating 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, though with a reduced administrative workload after plan year end.
*as of March 2024
Working with a well-informed, reliable team is essential to making sure your 401(k) audit in Jersey City, NJ goes as smoothly as possible. With Correct Capital supporting you, you’ll be assured that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in Jersey City, NJ
Meeting 401(k) audit requirements is both a legal requirement and an opportunity to verify your Jersey City, NJ company's retirement plan stays advantageous to your employees. Correct Capital’s experience in assisting Jersey City, NJ businesses navigate the 401(k) audit reduces the strain, allowing you to focus on your business while avoiding fines for non-compliance.
Contact Correct Capital today to book a meeting and we'll guide you get ready for a streamlined, effective audit. Our team of experts will support you with everything, including document collection to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Jersey City, NJ advisor team, contact us online, or call us at 877-930-401(k) to begin.
