401(k) Audit Services in Mesquite, TX. For Mesquite, TX businesses offering their employees retirement plans, navigating a 401(k) audit can seem like a challenging process. 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 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 interfere with your company’s daily operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches and cannot be avoided. Our team will assist you for everything from document collection through making sure Form 5500 is filed correctly and on time. Whether you're preparing for your first audit in Mesquite, TX, 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 schedule 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 annual review mandated for Mesquite, TX companies with 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 are still required to have an audit if there are 100 who have the option to participate if they wanted. The audit ensures that the retirement plan complies with the regulations set by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s financial integrity, ensuring that contributions, distributions, and plan activities are faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be challenging and lengthy. Correct Capital supports Mesquite, TX businesses prepare for these audits by helping with document collection, ensuring comprehension of compliance testing, as well as other audit processes. With the right support, handling the audit process can become a much easier process.
Why are 401(k) Audits Necessary for Mesquite, TX Companies?
You must undergo a 401(k) audit for multiple purposes, to ensure retirement plans adhere to federal regulations and safeguard 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 adheres to 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 verifies whether the plan isn't overly advantageous to 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 contributions, distributions, or other facets of plan oversight, providing an opportunity to fix these issues to avoid penalties.
- Filing Form 5500: The audit confirms the accurate and on-time filing 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 contribution limits, preventing excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may review plan fees to verify they are reasonable and don’t pose an excessive cost for participants. Overpriced fees could lead to compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Mesquite, TX employers are serving the interests 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 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 Mesquite, TX employers could face, based on the specific details 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 mandated for most larger 401(k) plans. In a full-scope audit, the independent auditor reviews all aspects of the plan, such as financial statements, adherence to Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates 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 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 is not obligated to audit the investment information verified by the financial institution, which can significantly reduce the audit’s complexity and cost. This may make it a better alternative for some Mesquite, TX businesses, if they satisfy the criteria.
The kind of audit your plan needs is determined by your plan’s unique features, such as the nature of its investments. At Correct Capital, we can help you understand which type of audit your plan requires and ensure you're fully prepared for both audit types.
401(k) Audit Pain Points for Mesquite, TX Employers
While 401(k) audits are required to meet legal obligations, they often present significant challenges for Mesquite, TX employers, especially those overseeing more substantial retirement plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Assembling the right documents, such as account statements, tax returns, and employee data, can be labor-intensive. Employers often struggle to organize and file the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with changing DOL, IRS, and ERISA regulations can be challenging. Compliance missteps can lead to audit failures, sanctions, and expensive fixes later on.
- Discrimination Testing: Verifying that the plan doesn't favor higher earning employees involves detailed compliance reviews and can result in 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, adding strain and distracting them from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 correctly and before the deadline, which plays a critical role in 401(k) compliance. Missing the deadline could cause penalties and create further issues for the company.
At Correct Capital, we understand these challenges and deliver personalized help to streamline the audit procedure in Mesquite, TX. 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 Mesquite, TX employers hoping to ease the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can offer relief. These plans enable different employers to consolidate into one 401(k) plan, frequently removing 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 allows Mesquite, TX businesses to share 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 join a shared 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and reduces costs, making it a desirable option for Mesquite, TX 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 Mesquite, TX, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Mesquite, TX 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 having the right experts on your side is important:
- Experience and Expertise: A team of experts understands the nuances of 401(k) audits, including 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: Every 401(k) plan is different. An experienced team will collaborate with you to grasp the unique needs of your plan and assist you in getting ready 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, enabling us to understand the specifics of any company 401(k) plan.
- Saving Time and Resources: Getting ready for a 401(k) audit can consume a lot of time from day-to-day operations. The ideal support will shoulder a lot of the admin work, allowing your HR and finance teams the freedom to concentrate on other tasks. 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 individual plan 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
Collaborating with a experienced, reliable team is key to ensuring your 401(k) audit in Mesquite, TX is as painless as possible. With Correct Capital as your partner, you’ll be assured that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in Mesquite, TX
Complying with 401(k) audits is both a mandatory process and an important way to confirm your Mesquite, TX company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s knowledge of helping Mesquite, TX businesses complete the 401(k) audit helps ease the burden, enabling you to concentrate on your operations while preventing penalties for non-compliance.
Contact Correct Capital today to schedule a consultation and allow us to assist you ensure your audit goes smoothly and efficiently. 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 Mesquite, TX advisor team, contact us online, or call us at 877-930-401(k) to begin.
