401(k) Audit Services in Lexington, KY. For Lexington, KY businesses that offer 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 disproportionately benefit higher-paid employees, there is a lot to keep track of. 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 be a major source of stress and 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 navigating your first audit in Lexington, KY, or hoping to optimize a previously cumbersome process, we're here to ensure it’s as smooth and easy as possible. 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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About 401(k) Audits
A 401(k) audit is an yearly review required for Lexington, KY companies who have 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 have the option to participate if they wanted. The audit confirms that the retirement plan follows the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s overall financial health, ensuring that contributions, withdrawals, and operations are faithfully recorded.
While required for regulatory purposes, 401(k) audits can be challenging and demanding. Correct Capital helps Lexington, KY businesses prepare for these audits by assisting with document collection, ensuring comprehension of compliance testing, as well as other audit processes. With the right support, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Lexington, KY 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 you need them:
- 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 disproportionately benefits higher-paid employees (often known as “top-heavy” testing) in order to promote the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits often expose errors in employee contributions, distributions, or other facets of plan oversight, providing an opportunity to fix these issues to avoid penalties.
- Filing Form 5500: The audit guarantees the accurate and on-time filing of Form 5500, a required document 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 remain within IRS contribution limits, preventing excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may review plan fees to confirm they are reasonable and not overly expensive for participants. Overpriced fees could lead to compliance concerns and hurt how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Lexington, KY employers are serving the interests of plan participants, fulfilling their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Verifying 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 kinds of 401(k) audits that Lexington, KY 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 most detailed audit necessary for most larger 401(k) plans. In a full-scope audit, the independent auditor examines every part of the plan, including financial statements, conformance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines supporting documentation for contributions, withdrawls, and other transactions to confirm correctness and adherence to regulations.
- 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 be eligible for a limited-scope audit. In this type, the auditor is not obligated to audit the investment information verified by the financial institution, which can greatly lessen the audit’s complexity and cost. This may make it a better alternative for some Lexington, KY businesses, provided they meet the criteria.
The type of audit you need is based on your plan’s unique features, including the nature of its investments. At Correct Capital, we will guide you to determine which type of audit your plan requires and make sure you're ready for whichever process is necessary.
401(k) Audit Pain Points for Lexington, KY Employers
While 401(k) audits are required to meet legal obligations, they often present significant challenges for Lexington, KY employers, particularly 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 a lengthy process. Employers may find it challenging to organize and file the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with shifting DOL, IRS, and ERISA regulations can be challenging. Compliance oversights can result in audit failures, fines, and expensive fixes down the line.
- Discrimination Testing: Making sure that the plan isn’t top-heavy demands thorough checks for compliance and can lead to additional documentation and reporting.
- Time and Resource Demands: Audit preparation takes HR professionals, business owners, administrators, and others out of their core responsibilities, increasing stress and distracting them from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 accurately and on time, which is a key component of 401(k) compliance. Failing to meet the submission date may lead to penalties and cause additional problems for the company.
At Correct Capital, we are aware of the difficulties involved and deliver personalized help to make the audit process in Lexington, KY smoother. Be it 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 Lexington, KY employers hoping to ease the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can offer relief. These plans permit various businesses to participate in a unified 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 allows Lexington, KY businesses to divide the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs enable unrelated employers to join a shared 401(k) plan administered by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it a desirable option for Lexington, KY businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, all while maintaining adherence to regulations. Transitioning into an MEP or PEP may be especially appealing to smaller businesses in Lexington, KY, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Lexington, KY 401(k) Audit Team
401(k) audits can appear challenging, but selecting the proper assistance can make all the difference. 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 partnering with the right experts matters:
- Experience and Expertise: A highly experienced group will be familiar with the nuances 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, making sure your plan complies with all required guidelines.
- Tailored Support: All 401(k) plans are distinct. 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 handles more than 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 take considerable time away from day-to-day operations. The proper team will take on much of the administrative burden, enabling your HR and finance teams the freedom to concentrate on other tasks. Correct Capital helps streamline the 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 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
Partnering with a knowledgeable, reliable team is crucial for guaranteeing your 401(k) audit in Lexington, KY goes as smoothly as possible. With Correct Capital by your side, you’ll feel secure that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Lexington, KY
Complying with 401(k) audits is both a regulatory obligation and an opportunity to verify your Lexington, KY company's retirement plan stays advantageous to your employees. Correct Capital’s expertise in guiding Lexington, KY businesses navigate the 401(k) audit helps ease the burden, letting you prioritize your business while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to arrange a session 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, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Lexington, KY advisor team, contact us online, or call us at 877-930-401(k) to start the process.
