401(k) Audit Services in Lancaster, CA. For Lancaster, CA businesses that offer retirement plans, completing a 401(k) audit can feel like a daunting task. 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 does not need to disrupt your business and affect your daily business activities.
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 work with you with every aspect of document collection to making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in Lancaster, CA, or looking to streamline a process that's usually a burden, we're here to ensure it’s as smooth and easy as possible. You can book 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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About 401(k) Audits
A 401(k) audit is an annual review mandated for Lancaster, CA 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 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 evaluates the plan’s financial integrity, ensuring that contributions, withdrawals, and plan activities are accurately represented.
While necessary to meet legal requirements, 401(k) audits can be complex and time-consuming. Correct Capital assists Lancaster, CA businesses get ready for these audits by assisting with document collection, helping clarify compliance testing, and other related tasks. With the right support, navigating the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Lancaster, CA Companies?
You need to undergo a 401(k) audit for multiple purposes, ensuring that retirement plans stay in line with federal regulations and safeguard both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: A 401(k) audit guarantees that your 401(k) plan follows all legal requirements set by the Department of Labor (DOL) and the IRS, especially under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit verifies whether the plan does not unfairly favor higher-paid employees (often known as “top-heavy” testing) to ensure the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits can uncover errors in contributions, withdrawals, or other facets of plan oversight, providing an opportunity to fix these issues before they result in 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 confirms that employer and employee contributions do not exceed IRS contribution limits, preventing excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may review plan fees to confirm they are reasonable and don’t pose an excessive cost for participants. Overpriced fees could lead to compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit confirms that Lancaster, CA employers are acting in the best interest of plan participants, fulfilling their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Confirming 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 primary types of 401(k) Audits that Lancaster, CA employers may encounter, based on the specific details 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 required for most larger 401(k) plans. In a full-scope audit, the external 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 reviews supporting documentation for contributions, distributions, and other transactions to ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Previously referred to as a "Limited Scope Audit," these are for 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 endorsed by the financial institution, which can substantially lower the audit’s complexity and cost. This may make it a better alternative for some Lancaster, CA businesses, if they satisfy the criteria.
The specific audit required is based on 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 requires and ensure you're fully prepared for either process.
401(k) Audit Pain Points for Lancaster, CA Employers
While 401(k) audits are required to meet legal obligations, they can create major obstacles for Lancaster, CA employers, especially those managing larger plans. Here are some of the key pain points that employers encounter:
- Document Collection and Management: Assembling the required files, such as account statements, tax returns, and employee data, can be labor-intensive. Employers often struggle to sort through and deliver the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with shifting DOL, IRS, and ERISA regulations is difficult. Compliance missteps can lead to audit failures, fines, and expensive fixes later on.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy demands thorough checks for compliance and can necessitate additional documentation and reporting.
- Time and Resource Demands: Audit preparation draws HR professionals, business owners, administrators, and others out of their core responsibilities, heightening pressure and diverting attention from regular business activities.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 properly and punctually, which is a key component of 401(k) compliance. Late submissions could cause penalties and create further issues for the company.
At Correct Capital, we understand these challenges and provide tailored support to streamline the audit procedure in Lancaster, CA. 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 Lancaster, CA employers hoping to ease the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can offer relief. These plans enable different employers to participate in a unified 401(k) plan, often eliminating 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 enables Lancaster, CA businesses to distribute the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs permit unrelated employers to enter a unified 401(k) plan managed by a pooled plan provider (PPP). This structure streamlines the regulatory process and reduces costs, making it attractive for Lancaster, CA businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while ensuring regulatory compliance. Moving to one of these plans may be highly beneficial for smaller firms in Lancaster, CA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Lancaster, CA 401(k) Audit Team
401(k) audits can seem difficult, but choosing the right support can greatly improve the process. Collaborating with experts that has a firm grasp of both technical and practical elements of the audit process can save you significant time and stress. Here’s why partnering with the right experts matters:
- Experience and Expertise: A team of experts understands the complexities of 401(k) audits, covering both 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 will help you stay on top of 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 identify 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, 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: Audit preparation can consume a lot of time from day-to-day operations. The proper team will handle most of the administrative tasks, allowing your HR and finance teams the ability to address other important matters. Correct Capital simplifies the entire process, reducing the pressure on your internal team.
- MEPs and PEPs Expertise: For businesses in a Multiple Employer Plan (MEP) or Pooled Employer Plan (PEP), while an separate audit is no longer necessary, you're still required to comply with all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Partnering with a knowledgeable, reliable team is crucial for guaranteeing your 401(k) audit in Lancaster, CA is as painless 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 Lancaster, CA
Meeting 401(k) audit requirements is both a legal requirement and an important way to confirm your Lancaster, CA company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s knowledge of helping Lancaster, CA businesses through the 401(k) audit reduces the strain, enabling you to concentrate on your operations while preventing penalties 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 through to compliance checks, making sure your plan is set up for success. You can schedule a meeting with a member of our Lancaster, CA advisor team, contact us online, or call us at 877-930-401(k) to begin.