401(k) Audit Services in Lakewood, CO. For Lakewood, CO businesses offering their employees retirement plans, navigating a 401(k) audit can feel like a challenging process. Between regulation from the Department of Labor (DOL) and IRS, gathering a large amount of paperwork, and ensuring that your plan isn’t “top-heavy”, it can be overwhelming. However, with the right support, the 401(k) audit does not need to disrupt your business 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 a regulatory requirement. Our team will assist you for everything from document collection through making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in Lakewood, CO, or seeking to simplify a previously inefficient 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.
About 401(k) Audits
A 401(k) audit is an yearly review mandated for Lakewood, CO companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively enrolled in the plan, you still need an audit if there are 100 who are eligible. The audit ensures 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 financial integrity, ensuring that employee contributions, withdrawals, and operations are faithfully recorded.
While necessary for compliance, 401(k) audits can be challenging and time-consuming. Correct Capital supports Lakewood, CO businesses get ready for these audits by assisting with document collection, helping clarify compliance testing, etc... 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 Lakewood, CO Companies?
You must 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 you need them:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan follows 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 the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits often expose errors in contributions, withdrawals, or other aspects of plan management, enabling you to resolve these issues so they don't lead to penalties.
- Filing Form 5500: The audit confirms the accurate and on-time filing of Form 5500, a yearly filing detailing the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions stay within IRS limits for the year, helping to avoid 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 negatively impact the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit verifies that Lakewood, CO employers are serving the interests of plan participants, meeting their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Confirming 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 Lakewood, CO employers may encounter, based on the specific details 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 most detailed audit required for most larger 401(k) plans. In a full-scope audit, the external auditor examines every part of the plan, such as 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 verify that everything is accurate and in compliance.
- Section 103(a)(3)(C)) Audit: Previously referred to 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 is not obligated to audit the investment information certified by the financial institution, which can substantially lower the audit’s complexity and cost. This can make it a preferable choice for some Lakewood, CO businesses, if they satisfy the criteria.
The specific audit required is determined by your plan’s unique features, like the nature of its investments. At Correct Capital, we are able to assist you figure out which type of audit your plan is subject to and ensure you're fully prepared for whichever process is necessary.
401(k) Audit Pain Points for Lakewood, CO Employers
While 401(k) audits are necessary for compliance, they can create major obstacles for Lakewood, CO employers, especially those offering bigger 401(k) plans. Here are some of the key pain points that businesses face:
- Document Collection and Management: Collecting the required files, such as account statements, tax returns, and employee data, can be labor-intensive. Employers may find it challenging to arrange and submit the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with shifting DOL, IRS, and ERISA regulations can prove difficult. Compliance missteps can lead to audit failures, penalties, and expensive fixes in the long run.
- Discrimination Testing: Making sure 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 draws HR professionals, business owners, administrators, and others out of their core responsibilities, heightening pressure and diverting attention from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 accurately and on time, which plays a critical role in 401(k) compliance. Missing the deadline can result in penalties and cause additional problems for the company.
At Correct Capital, we understand these challenges and offer customized assistance to make the audit process in Lakewood, CO smoother. From assisting with 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 Lakewood, CO employers looking to lower the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can provide solutions. These plans enable different employers to consolidate into one 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 permits Lakewood, CO 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 join a shared 401(k) plan administered by a pooled plan provider (PPP). This structure makes meeting regulations easier and lowers expenses, making it a desirable option for Lakewood, CO businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, all while maintaining adherence to regulations. Moving to one of these plans may be especially appealing to smaller businesses in Lakewood, CO, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Lakewood, CO 401(k) Audit Team
401(k) audits can appear challenging, but choosing the right support can greatly improve the process. Working with a team that is well-versed in both the technicalities and practicalities 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 is knowledgeable about 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 helps you remain up to date with evolving regulations, ensuring that your plan meets all necessary standards.
- Tailored Support: All 401(k) plans are distinct. 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 is responsible for managing 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 shoulder a lot of the admin work, allowing your HR and finance teams the freedom to concentrate on other tasks. Correct Capital makes the process smoother, 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 obligated to adhere to all the rules and regulations, though with a reduced administrative workload after plan year end.
*as of March 2024
Collaborating with a experienced, reliable team is essential to making sure your 401(k) audit in Lakewood, CO runs efficiently and stress-free. With Correct Capital supporting you, you’ll have the confidence that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Lakewood, CO
Adhering to 401(k) audit regulations is both a mandatory process and an important way to confirm your Lakewood, CO company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s experience in assisting Lakewood, CO businesses through the 401(k) audit lightens the load, enabling you to concentrate on your operations while preventing penalties for non-compliance.
Contact Correct Capital today to schedule a consultation and let us help you get ready for a streamlined, effective audit. Our team of experts will help with all aspects from document collection through to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Lakewood, CO advisor team, contact us online, or call us at 877-930-401(k) to get started.
