401(k) Audit Services in Naperville, IL. For Naperville, IL businesses offering their employees retirement plans, completing a 401(k) audit can feel like an uphill battle. Between regulation from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan doesn't favor higher-paid employees, there is a lot to keep track of. However, with the right support, the 401(k) audit can be made much easier and interfere with your company’s daily operations.
At Correct Capital, we understand that 401(k) audits can cause considerable frustration and cannot be avoided. Our team will work with you with every aspect of document collection through making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in Naperville, IL, 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, fill out our online form, 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 annual review required for Naperville, IL companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively participating in the plan, you still need an audit if there are 100 who are eligible. The audit confirms that the retirement plan complies with the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s financial integrity, ensuring that employee contributions, distributions, and operations are accurately represented.
While required for regulatory purposes, 401(k) audits can be complicated and demanding. Correct Capital supports Naperville, IL businesses prepare for these audits by assisting with document collection, assisting with understanding compliance testing, and other related tasks. With an experienced team in your corner, navigating the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Naperville, IL Companies?
You must undergo a 401(k) audit for a variety of reasons, to ensure retirement plans remain compliant with federal regulations and protect both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan follows all legal requirements mandated by the Department of Labor (DOL) and the IRS, especially under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit ensures that the plan isn't overly advantageous to 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 employee contributions, withdrawals, or other aspects of plan management, enabling you to resolve these issues before they result in penalties.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, an annual report detailing 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 do not exceed IRS limits for the year, helping to avoid excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may review plan fees to confirm they are reasonable and don’t pose an excessive cost for participants. Excessive fees may prompt compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Naperville, IL employers are serving the interests of plan participants, satisfying their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Ensuring 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 Naperville, IL 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 thorough audit mandated for most larger 401(k) plans. In a full-scope audit, the third-party auditor reviews all aspects of the plan, including financial statements, adherence to Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines 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 take advantage of a limited-scope audit. In this type, the auditor does not need to audit the investment information endorsed by the financial institution, which can substantially lower the audit’s complexity and cost. This may make it a more attractive option for some Naperville, IL businesses, if they satisfy the criteria.
The specific audit required is based on your plan’s unique features, including the nature of its investments. At Correct Capital, we will guide you to understand which type of audit your plan is subject to and make sure you're ready for either process.
401(k) Audit Pain Points for Naperville, IL Employers
While 401(k) audits are necessary for compliance, they often present significant challenges for Naperville, IL employers, notably those overseeing more substantial retirement 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 a lengthy process. Employers frequently have difficulties to arrange and file the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with evolving DOL, IRS, and ERISA regulations can be challenging. Compliance missteps can lead to audit failures, fines, and expensive fixes later on.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy demands thorough checks for compliance and can lead to additional documentation and reporting.
- Time and Resource Demands: Audit preparation takes 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 have difficulty with file Form 5500 accurately and on time, which is essential to 401(k) compliance. Failing to meet the submission date may lead to 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 Naperville, IL more efficient. Whether it’s helping with document collection or verifying adherence to regulations, our team helps take the burden off your shoulders.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For Naperville, IL employers looking to lower the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can ease the process. These plans allow unrelated employers to participate in a unified 401(k) plan, often eliminating 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 Naperville, IL businesses to share the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs allow unrelated employers to join a shared 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and lowers expenses, making it attractive for Naperville, IL businesses looking to streamline 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 especially appealing to smaller businesses in Naperville, IL, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Naperville, IL 401(k) Audit Team
401(k) audits can seem difficult, but choosing the right support can greatly improve the process. Partnering with professionals 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 skilled team understands the nuances of 401(k) audits, encompassing full-scope and limited-scope audits. We help you navigate the documentation process and pinpoint potential improvements 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 partner with you to grasp the unique needs of your plan and guide you in preparing for your specific audit requirements. Correct Capital is responsible for managing over 37 plans in both small and large companies, and represents 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 consume a lot of time from day-to-day operations. The right partner will handle most of the administrative tasks, allowing your HR and finance teams the freedom to concentrate on other tasks. Correct Capital makes the process smoother, taking the stress off 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 not required, 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 well-informed, reliable team is essential to making sure your 401(k) audit in Naperville, IL is as painless as possible. 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 Naperville, IL
Complying with 401(k) audits is both a legal requirement and an opportunity to ensure your Naperville, IL company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s expertise in guiding Naperville, IL businesses through the 401(k) audit reduces the strain, allowing you to focus on your business while avoiding fines for non-compliance.
Contact Correct Capital today to book a meeting and let us help you get ready for a streamlined, effective audit. Our team of experts will help with all aspects from document collection to compliance checks, making sure your plan is set up for success. You can schedule a meeting with a member of our Naperville, IL advisor team, contact us online, or call us at 877-930-401(k) to get started.
