401(k) Audit Services in McKinney, TX. For McKinney, TX businesses that offer retirement plans, completing a 401(k) audit can seem like an uphill battle. 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”, there are many factors to consider. However, with the right support, the 401(k) audit does not need to disrupt your business and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches and cannot be avoided. Our team will work with you with every aspect of document collection to meeting Form 5500 deadlines. Whether you're navigating your first audit in McKinney, TX, or seeking to simplify a process that's usually a burden, we're here to make it as simple and stress-free 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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What is a 401(k) Audit?
A 401(k) audit is an yearly review required for McKinney, TX companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you lack 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 confirms that the retirement plan complies with the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s financial integrity, ensuring that contributions, distributions, and plan activities are accurately represented.
While necessary to meet legal requirements, 401(k) audits can be complex and demanding. Correct Capital helps McKinney, TX businesses get ready for these audits by assisting with document collection, helping clarify 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 McKinney, TX Companies?
You must undergo a 401(k) audit for multiple purposes, to ensure retirement plans stay in line with federal regulations and protect both the employer and employees. Here’s why they are necessary:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm that your 401(k) plan follows all legal requirements mandated by the Department of Labor (DOL) and the IRS, particularly under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit ensures that the plan disproportionately benefits higher-paid employees (often known as “top-heavy” testing) to guarantee the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits often expose errors in employee contributions, distributions, or other aspects of plan management, allowing you to correct these issues to avoid fines.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, an annual report that outlines the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions stay within IRS contribution limits, helping to avoid excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may examine plan fees to ensure they are reasonable and not overly expensive for participants. Excessive fees may prompt compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that McKinney, TX employers are acting in the best interest of plan participants, satisfying 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 one of the most important parts of the audit.
Types of 401(k) Audits
There are two kinds of 401(k) audits that McKinney, TX employers might come across, depending on the size and complexity 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 independent auditor reviews all aspects of the plan, including financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor reviews supporting documentation for contributions, withdrawls, and other transactions to confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Previously referred to as 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 required to audit the investment information verified by the financial institution, which can significantly reduce the audit’s complexity and cost. This can make it a more attractive option for some McKinney, TX businesses, as long as they meet the criteria.
The kind of audit your plan needs is determined by your plan’s unique features, like the nature of its investments. At Correct Capital, we can help you figure out which type of audit your plan requires and make sure you're ready for whichever process is necessary.
401(k) Audit Pain Points for McKinney, TX Employers
While 401(k) audits must be conducted to ensure compliance, they frequently pose difficulties for McKinney, TX employers, notably those managing larger plans. Here are some of the key pain points that businesses face:
- Document Collection and Management: Assembling the required files, such as account statements, tax returns, and employee data, can be time-consuming. Employers frequently have difficulties to arrange and submit the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with shifting DOL, IRS, and ERISA regulations can be challenging. Compliance missteps can cause audit failures, penalties, and costly corrections in the long run.
- Discrimination Testing: Verifying that the plan doesn't favor higher earning employees demands thorough checks for compliance and can lead to additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit draws HR professionals, business owners, administrators, and others away from their core responsibilities, heightening pressure and distracting them from everyday business tasks.
- 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 can result in penalties and create further issues for the company.
At Correct Capital, we are aware of the difficulties involved and deliver personalized help to make the audit process in McKinney, TX more efficient. From assisting with document collection or ensuring compliance 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 McKinney, TX employers looking to lower the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can ease the process. These plans enable different employers 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, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup enables McKinney, TX businesses to divide the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs enable unrelated employers to participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it appealing for McKinney, TX businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while ensuring regulatory compliance. Transitioning into an MEP or PEP may be particularly attractive for small companies in McKinney, TX, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right McKinney, TX 401(k) Audit Team
401(k) audits can be daunting, but selecting the proper assistance changes everything. Collaborating with experts that understands both the technical and practical aspects of the audit process can save you significant time and stress. Here’s why having the right experts on your side is important:
- Experience and Expertise: A highly experienced group understands the details of 401(k) audits, covering both full-scope and limited-scope audits. We will assist you with 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: Each 401(k) plan has unique requirements. An experienced team will collaborate with you to understand 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, giving us the expertise to handle any company 401(k) plan.
- Saving Time and Resources: Audit preparation can take considerable time away from day-to-day operations. The proper team 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, easing the load for your internal team.
- MEPs and PEPs Expertise: For businesses enrolled in an MEP or PEP, while an separate audit is no longer necessary, you're still required to comply with all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Working with a knowledgeable, reliable team is key to ensuring your 401(k) audit in McKinney, TX runs efficiently and stress-free. With Correct Capital as your partner, you’ll feel secure that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in McKinney, TX
Complying with 401(k) audits is both a mandatory process and an important way to confirm your McKinney, TX company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s experience in assisting McKinney, TX businesses complete the 401(k) audit helps ease the burden, allowing you to focus on your business while preventing penalties for non-compliance.
Contact Correct Capital today to book a meeting and allow us to assist 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 McKinney, TX advisor team, contact us online, or call us at 877-930-401(k) to start the process.
