401(k) Audit Services in Minneapolis, MN. For Minneapolis, MN businesses that offer retirement plans, navigating a 401(k) audit can seem like a challenging process. Between compliance requirements from the Department of Labor (DOL) and IRS, collecting extensive documentation, and ensuring that your plan isn’t “top-heavy”, there are many factors to consider. 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 create significant headaches even though they cannot be avoided. Our team will work with 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 Minneapolis, MN, or looking to streamline 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, contact us online, 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 mandated for Minneapolis, MN companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively participating in the plan, you must still undergo 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 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 employee contributions, withdrawals, and plan activities are faithfully recorded.
While necessary for compliance, 401(k) audits can be complex and demanding. Correct Capital assists Minneapolis, MN businesses navigate these audits by aiding in document collection, helping clarify compliance testing, and other related tasks. With an experienced team by your side, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Minneapolis, MN Companies?
You need to 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: A 401(k) audit guarantees that your 401(k) plan follows all legal requirements established by the Department of Labor (DOL) and the IRS, especially under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit checks if the plan does not unfairly favor higher-paid employees (often known 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 facets of plan oversight, allowing you to correct these issues before they result in penalties.
- Filing Form 5500: The audit confirms the accurate and on-time filing of Form 5500, a required document that outlines the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions do not exceed IRS limits for the year, reducing the risk of excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may review plan fees to verify they are reasonable and aren’t unnecessarily high for participants. High fees can raise compliance concerns and hurt how employees' investments and savings perform.
- Fiduciary Oversight: The audit ensures that Minneapolis, MN employers are serving the interests of plan participants, fulfilling their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are in compliance 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 Minneapolis, MN employers could face, 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 more comprehensive audit mandated for most larger 401(k) plans. In a full-scope audit, the external auditor reviews all aspects of the plan, including financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines supporting documentation for contributions, withdrawls, and other transactions to ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Formerly known as a "Limited Scope Audit," these apply to plans with investments managed by a qualified, regulated financial institution (such as a bank or insurance company). The employer may qualify 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 substantially lower the audit’s complexity and cost. This can make it a preferable choice for some Minneapolis, MN businesses, provided they meet 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 can help you understand which type of audit your plan is subject to and help you be well-prepared for whichever process is necessary.
401(k) Audit Pain Points for Minneapolis, MN Employers
While 401(k) audits must be conducted to ensure compliance, they frequently pose difficulties for Minneapolis, MN employers, especially those managing larger plans. Below are several common challenges that companies deal with:
- Document Collection and Management: Assembling the required files, such as account statements, tax returns, and employee data, can be labor-intensive. Employers often struggle to arrange and file the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with evolving DOL, IRS, and ERISA regulations can prove difficult. Compliance errors can result in audit failures, penalties, and pricey amendments later on.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy requires careful compliance checks and can necessitate 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 day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 accurately and on time, which is a key component of 401(k) compliance. Missing the deadline could cause penalties and create further issues for the company.
At Correct Capital, we recognize these obstacles and offer customized assistance to make the audit process in Minneapolis, MN more efficient. 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 Minneapolis, MN employers hoping to ease the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can ease the process. These plans permit various businesses to consolidate into one 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 enables Minneapolis, MN businesses to share the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs allow unrelated employers to enter a unified 401(k) plan managed by a pooled plan provider (PPP). This structure simplifies compliance and reduces costs, making it attractive for Minneapolis, MN businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while still ensuring compliance with federal regulations. Moving to one of these plans may be particularly attractive for small companies in Minneapolis, MN, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Minneapolis, MN 401(k) Audit Team
401(k) audits can appear challenging, but choosing the right support can greatly improve the process. Collaborating with experts that understands both the technical and practical aspects 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 understands the complexities of 401(k) audits, including both full-scope and limited-scope audits. We can guide you through the documentation process and highlight areas for enhancement within your plan.
- Compliance Assurance: The right team ensures you keep up with evolving regulations, making sure your plan complies with all required guidelines.
- Tailored Support: Every 401(k) plan is different. An experienced team will work closely with you to grasp the unique needs of your plan and assist you in getting ready 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, enabling us to understand the specifics of 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, enabling your HR and finance teams to focus on other priorities. 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 not required, you're still responsible for following 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 Minneapolis, MN 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 Minneapolis, MN
Meeting 401(k) audit requirements is both a regulatory obligation and an important way to confirm your Minneapolis, MN company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s experience in assisting Minneapolis, MN businesses through the 401(k) audit reduces the strain, letting you prioritize your business while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to book a meeting and we'll guide you ensure your audit goes smoothly and efficiently. Our team of experts will help with all aspects from document collection to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Minneapolis, MN advisor team, contact us online, or call us at 877-930-401(k) to begin.
