401(k) Audit Services in Louisville, KY. For Louisville, KY businesses offering their employees retirement plans, navigating a 401(k) audit can feel like a daunting task. Between compliance requirements from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan isn’t “top-heavy”, 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 even though they are a regulatory requirement. Our team will work with you for everything from document collection through meeting Form 5500 deadlines. Whether you're preparing for your first audit in Louisville, KY, or hoping to optimize a process that's usually a burden, we're here to minimize the hassle. You can book 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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About 401(k) Audits
A 401(k) audit is an yearly review required for Louisville, KY 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 are eligible. The audit confirms that the retirement plan adheres to the regulations set by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s overall financial health, ensuring that contributions, withdrawals, and plan activities are faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be challenging and lengthy. Correct Capital helps Louisville, KY businesses prepare for these audits by aiding in document collection, ensuring comprehension of compliance testing, as well as other audit processes. With the right support, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Louisville, KY Companies?
You need to undergo a 401(k) audit for several reasons, ensuring that retirement plans stay in line with federal regulations and protect 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 adheres to 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 referred to 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 aspects of plan management, allowing you to correct these issues to avoid penalties.
- Filing Form 5500: The audit ensures proper and timely submission of Form 5500, a yearly filing that outlines the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit verifies that employer and employee contributions do not exceed IRS contribution limits, preventing excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to verify they are reasonable and aren’t unnecessarily high for participants. Excessive fees may prompt compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Louisville, KY employers are serving the interests of plan participants, meeting their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are consistent 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 Louisville, KY employers could face, 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 mandated for most larger 401(k) plans. In a full-scope audit, the external auditor evaluates all components of the plan, which includes financial statements, conformance 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 called a "Limited Scope Audit," these pertain 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 does not need to audit the investment information endorsed by the financial institution, which can greatly lessen the audit’s complexity and cost. This can make it a better alternative for some Louisville, KY businesses, as long as they meet the criteria.
The kind of audit your plan needs depends on your plan’s unique features, including 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 help you be well-prepared for both audit types.
401(k) Audit Pain Points for Louisville, KY Employers
While 401(k) audits are necessary for compliance, they can create major obstacles for Louisville, KY employers, notably those overseeing more substantial retirement plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Collecting the right documents, such as account statements, tax returns, and employee data, can be labor-intensive. Employers often struggle to sort through 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 oversights can cause audit failures, penalties, and costly corrections later on.
- 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: Preparing for an audit pulls HR professionals, business owners, administrators, and others off of their core responsibilities, increasing stress and shifting focus from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 correctly and before the deadline, which is a key component of 401(k) compliance. Failing to meet the submission date can result in penalties and complicate things for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to make the audit process in Louisville, KY more efficient. Be it 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 Louisville, KY employers hoping to ease the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can provide solutions. These plans allow unrelated employers to join a single 401(k) plan, often eliminating 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 permits Louisville, KY businesses to distribute the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs permit unrelated employers to enter a unified 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and lowers expenses, making it attractive for Louisville, KY businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, while still ensuring compliance with federal regulations. Switching to these types of plans may be particularly attractive for small companies in Louisville, KY, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Louisville, KY 401(k) Audit Team
401(k) audits can seem difficult, but selecting the proper assistance can greatly improve the process. Partnering with professionals that has a firm grasp of both technical and practical elements of the audit process reduces the time and pressure you face. Here’s why partnering with the right experts matters:
- Experience and Expertise: A highly experienced group will be familiar with the complexities of 401(k) audits, encompassing 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 helps you remain up to date with evolving regulations, ensuring that your plan meets all necessary standards.
- Tailored Support: Every 401(k) plan is different. An experienced team will collaborate 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, 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 right partner will take on much of the administrative burden, allowing your HR and finance teams the freedom to concentrate on other tasks. Correct Capital helps streamline the process, easing the load for your internal team.
- MEPs and PEPs Expertise: For businesses participating in an MEP or PEP, while an audit specific to your plan is not required, 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
Working with a knowledgeable, reliable team is crucial for guaranteeing your 401(k) audit in Louisville, KY runs efficiently and stress-free. With Correct Capital by your side, you’ll feel secure that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Louisville, KY
Meeting 401(k) audit requirements is both a mandatory process and an important way to confirm your Louisville, KY company's retirement plan stays advantageous to your employees. Correct Capital’s experience in assisting Louisville, 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 schedule a consultation and we'll guide you prepare for a smooth, efficient audit. 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 Louisville, KY advisor team, contact us online, or call us at 877-930-401(k) to get started.
