401(k) Audit Services in New York City, NY. For New York City, NY 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, 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 doesn’t have to feel like a burden and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can be a major source of stress even though they cannot be avoided. Our team will assist 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 New York City, NY, or seeking to simplify a previously cumbersome process, we're here to make it as simple and stress-free as possible. You can ask for 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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Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
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About 401(k) Audits
A 401(k) audit is an annual review mandated for New York City, NY companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you don’t have more than 100 employees actively enrolled in the plan, you still need an audit if there are 100 who are eligible. The audit ensures that the retirement plan adheres to the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s overall financial health, ensuring that employee contributions, distributions, and operations are properly documented.
While necessary to meet legal requirements, 401(k) audits can be challenging and demanding. Correct Capital helps New York City, NY businesses get ready for these audits by aiding in document collection, ensuring comprehension of compliance testing, etc... With the right support, navigating the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for New York City, NY 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: Audits ensure that your 401(k) plan complies with all legal requirements established 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 referred to as “top-heavy” testing) in order to promote the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits can uncover errors in contributions, distributions, or other aspects of plan management, enabling you to resolve these issues so they don't lead to penalties.
- Filing Form 5500: The audit guarantees proper and timely submission of Form 5500, a required document detailing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions do not exceed IRS contribution limits, helping to avoid excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to confirm 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 confirms that New York City, NY employers are serving the interests of plan participants, satisfying their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Confirming that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is a critical part of the audit.
Types of 401(k) Audits
There are two primary types of 401(k) Audits that New York City, NY employers might come across, 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 thorough audit necessary for most larger 401(k) plans. In a full-scope audit, the external auditor evaluates all components of the plan, which includes financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates supporting documentation for contributions, withdrawls, 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 is not required to audit the investment information verified by the financial institution, which can significantly reduce the audit’s complexity and cost. This could make it a preferable choice for some New York City, NY businesses, if they satisfy the criteria.
The type of audit you need is based on your plan’s particular characteristics, such as the nature of its investments. At Correct Capital, we will guide you to figure out which type of audit your plan requires and ensure you're fully prepared for both audit types.
401(k) Audit Pain Points for New York City, NY Employers
While 401(k) audits must be conducted to ensure compliance, they often present significant challenges for New York City, NY employers, especially those running bigger 401(k) plans. Below are several common challenges 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 often struggle to arrange and deliver the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with evolving DOL, IRS, and ERISA regulations is difficult. Compliance oversights can result in audit failures, fines, and pricey amendments later on.
- Discrimination Testing: Verifying that the plan doesn't favor higher earning employees requires careful compliance checks and can lead to additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit draws HR professionals, business owners, administrators, and others off of their core responsibilities, heightening pressure and shifting focus from regular business activities.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 properly and punctually, which is essential to 401(k) compliance. Late submissions may lead to penalties and cause additional problems for the company.
At Correct Capital, we understand these challenges and provide tailored support to make the audit process in New York City, NY smoother. Whether it’s helping with 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 New York City, NY employers seeking to reduce 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 join a single 401(k) plan, reducing the need for employer-specific audits.
- Multiple Employer Plans (MEP): These plans pool together several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup permits New York City, NY businesses to distribute the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs allow unrelated employers to join a shared 401(k) plan overseen by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it appealing for New York City, NY 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. Transitioning into an MEP or PEP may be particularly attractive for small companies in New York City, NY, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right New York City, NY 401(k) Audit Team
401(k) audits can be daunting, but choosing the right support changes everything. 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 partnering with the right experts matters:
- Experience and Expertise: A team of experts will be familiar with the complexities of 401(k) audits, covering both full-scope and limited-scope audits. We will assist you with 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: All 401(k) plans are distinct. 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, 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: Preparing for a 401(k) audit can take considerable time away from day-to-day operations. The ideal support will handle most of the administrative tasks, giving 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 no longer necessary, you're still responsible for following all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Working with a well-informed, reliable team is key to ensuring your 401(k) audit in New York City, NY runs efficiently and stress-free. With Correct Capital by your side, you’ll be assured that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in New York City, NY
Complying with 401(k) audits is both a legal requirement and an important way to confirm your New York City, NY company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s knowledge of helping New York City, NY businesses complete the 401(k) audit reduces the strain, enabling you to concentrate on your operations while avoiding fines 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 assist with everything from document collection through to compliance checks, making sure your plan is set up for success. You can schedule a meeting with a member of our New York City, NY advisor team, contact us online, or call us at 877-930-401(k) to begin.
