401(k) Audit Services in Los Angeles, CA. For Los Angeles, CA businesses that offer retirement plans, completing a 401(k) audit can seem like a daunting task. Between regulation from the Department of Labor (DOL) and IRS, gathering a large amount of paperwork, 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 cause considerable frustration and are a regulatory requirement. Our team will assist you for everything from document collection to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Los Angeles, CA, or seeking to simplify a previously cumbersome process, we're here to minimize the hassle. 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.
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Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
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What is a 401(k) Audit?
A 401(k) audit is an yearly review necessary for Los Angeles, CA 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 contributing to the plan, you still need an audit if there are 100 who have the option to participate if they wanted. The audit ensures that the retirement plan adheres to the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews 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 demanding. Correct Capital helps Los Angeles, CA businesses get ready for these audits by assisting with document collection, ensuring comprehension of compliance testing, and other related tasks. With the right support, getting through the audit can become a much easier process.
Why are 401(k) Audits Necessary for Los Angeles, CA Companies?
You must undergo a 401(k) audit for several reasons, to ensure retirement plans stay in line with federal regulations and protect both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm that your 401(k) plan follows all legal requirements established by the Department of Labor (DOL) and the IRS, with emphasis 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 employee contributions, withdrawals, or other aspects of plan management, providing an opportunity to fix these issues so they don't lead to fines.
- Filing Form 5500: The audit guarantees proper and timely submission of Form 5500, a required document summarizing the plan’s financial status, which is required to maintain compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions stay within IRS limits for the year, preventing excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to ensure they are reasonable and aren’t unnecessarily high for participants. High fees can raise compliance concerns and affect how employees' investments and savings perform.
- Fiduciary Oversight: The audit ensures that Los Angeles, CA employers are working to benefit plan participants, meeting their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Confirming 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 primary types of 401(k) Audits that Los Angeles, CA employers might come across, 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 thorough audit mandated for most larger 401(k) plans. In a full-scope audit, the third-party auditor reviews all aspects of the plan, which includes financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates supporting documentation for contributions, withdrawls, and other transactions to verify that everything is accurate and in compliance.
- Section 103(a)(3)(C)) Audit: Formerly known as a "Limited Scope Audit," these apply to plans with investments held 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 required to audit the investment information certified by the financial institution, which can significantly reduce the audit’s complexity and cost. This can make it a preferable choice for some Los Angeles, CA businesses, if they satisfy the criteria.
The kind of audit your plan needs depends on your plan’s particular characteristics, including the nature of its investments. At Correct Capital, we are able to assist you determine which type of audit your plan requires and help you be well-prepared for both audit types.
401(k) Audit Pain Points for Los Angeles, CA Employers
While 401(k) audits are required to meet legal obligations, they frequently pose difficulties for Los Angeles, CA employers, particularly those running bigger 401(k) plans. Below are several common challenges that employers encounter:
- Document Collection and Management: Collecting 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 file the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with changing DOL, IRS, and ERISA regulations can prove difficult. Compliance missteps can cause audit failures, sanctions, and pricey amendments down the line.
- Discrimination Testing: Making sure that the plan isn’t top-heavy requires careful compliance checks and can result in additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit takes HR professionals, business owners, administrators, and others off of their core responsibilities, increasing stress and distracting them from regular business activities.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 correctly and before the deadline, which is essential to 401(k) compliance. Failing to meet the submission date may lead to penalties and create further issues for the company.
At Correct Capital, we understand these challenges and offer customized assistance to streamline the audit procedure in Los Angeles, CA. Whether it’s helping with document collection or verifying adherence to 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 Los Angeles, CA employers hoping to ease the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can provide solutions. These plans allow unrelated employers to participate in a unified 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans pool together several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup permits Los Angeles, CA businesses to distribute the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs allow unrelated employers to enter a unified 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it attractive for Los Angeles, CA businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, all while maintaining adherence to regulations. Moving to one of these plans may be especially appealing to smaller businesses in Los Angeles, CA, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Los Angeles, CA 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place can make all the difference. Partnering with professionals that is well-versed in both the technicalities and practicalities of the audit process helps you avoid unnecessary delays and anxiety. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A skilled team 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 ensures you keep up with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: All 401(k) plans are distinct. An experienced team will collaborate with you to grasp the unique needs of your plan and help you prepare for your specific audit requirements. Correct Capital is responsible for managing over 37 plans in both small and large companies, with more than $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 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, taking the stress off your internal team.
- MEPs and PEPs Expertise: For businesses enrolled in an MEP or PEP, while an separate audit is no longer mandated, you're still obligated to adhere to 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 crucial for guaranteeing your 401(k) audit in Los Angeles, CA goes as smoothly as possible. With Correct Capital supporting you, 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 Los Angeles, CA
Complying with 401(k) audits is both a legal requirement and an opportunity to verify your Los Angeles, CA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s experience in assisting Los Angeles, CA businesses complete the 401(k) audit lightens the load, allowing you to focus on your business while preventing penalties 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 Los Angeles, CA advisor team, contact us online, or call us at 877-930-401(k) to get started.
