401(k) Audit Services in Newark, NJ. For Newark, NJ 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 doesn’t have to feel like a burden and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can cause considerable frustration and are a regulatory requirement. Our team will partner with you for everything from document collection to making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in Newark, NJ, 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 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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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 yearly review necessary for Newark, NJ companies with more than 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively enrolled in the plan, you must still undergo 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 mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s overall financial health, ensuring that employee contributions, distributions, and plan activities are faithfully recorded.
While required for regulatory purposes, 401(k) audits can be challenging and time-consuming. Correct Capital helps Newark, NJ businesses get ready for these audits by helping with document collection, ensuring comprehension of compliance testing, as well as other audit processes. With the right support, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Newark, NJ Companies?
You must undergo a 401(k) audit for multiple purposes, ensuring that retirement plans remain compliant with federal regulations and safeguard both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan adheres to all legal requirements established by the Department of Labor (DOL) and the IRS, with emphasis 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) in order to promote 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 confirms that employer and employee contributions stay within IRS limits for the year, reducing the risk of excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to ensure they are reasonable and don’t pose an excessive cost for participants. Overpriced fees could lead to compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit ensures that Newark, NJ employers are serving the interests of plan participants, fulfilling their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are aligned 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 Newark, NJ employers may encounter, based on the specific details of their plan. The audit type typically depends on the number of participants and the complexity of the investments in the plan.
- Full-Scope Audit: This is the most detailed audit required for most larger 401(k) plans. In a full-scope audit, the third-party 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 confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Formerly known as a "Limited Scope Audit," these are for 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 obligated to audit the investment information verified by the financial institution, which can substantially lower the audit’s complexity and cost. This could make it a better alternative for some Newark, NJ businesses, if they satisfy the criteria.
The kind of audit your plan needs is determined by your plan’s particular characteristics, including the nature of its investments. At Correct Capital, we are able to assist you understand which type of audit your plan is subject to and help you be well-prepared for either process.
401(k) Audit Pain Points for Newark, NJ Employers
While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Newark, NJ employers, notably those offering bigger 401(k) plans. These are some of the major issues that companies deal with:
- Document Collection and Management: Collecting the required files, such as account statements, tax returns, and employee data, can be a lengthy process. Employers often struggle to sort through and file the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with evolving DOL, IRS, and ERISA regulations is difficult. Compliance missteps can cause audit failures, penalties, and pricey amendments down the line.
- Discrimination Testing: Making sure that the plan isn’t top-heavy demands thorough checks for compliance and can necessitate additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit takes HR professionals, business owners, administrators, and others out of their core responsibilities, adding strain 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 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 streamline the audit procedure in Newark, NJ. Whether it’s helping with document collection or confirming conformity with regulations, our team helps take the burden off your shoulders.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For Newark, NJ employers looking to lower the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can ease the process. These plans enable different employers to consolidate into one 401(k) plan, reducing the need for employer-specific audits.
- Multiple Employer Plans (MEP): These plans consolidate several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup allows Newark, NJ businesses to share the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs permit unrelated employers to enter a unified 401(k) plan overseen by a pooled plan provider (PPP). This structure makes meeting regulations easier and lowers expenses, making it attractive for Newark, NJ businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while still ensuring compliance with federal regulations. Moving to one of these plans may be highly beneficial for smaller firms in Newark, NJ, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Newark, NJ 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place can greatly improve the process. Working with a team that understands both the technical and practical aspects of the audit process reduces the time and pressure you face. Here’s why having the right experts on your side is important:
- Experience and Expertise: A highly experienced group is knowledgeable about the complexities of 401(k) audits, covering both full-scope and limited-scope audits. We help you navigate the documentation process and help identify areas of improvement within your plan.
- Compliance Assurance: The right team will help you stay on top of evolving regulations, ensuring that your plan meets all necessary standards.
- Tailored Support: Every 401(k) plan is different. An experienced team will partner with you to identify 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, enabling us to understand the specifics of 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 shoulder a lot of the admin work, allowing your HR and finance teams to focus on other priorities. Correct Capital helps streamline the process, reducing the pressure on 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, though with a reduced administrative workload after plan year end.
*as of March 2024
Collaborating with a experienced, reliable team is crucial for guaranteeing your 401(k) audit in Newark, NJ 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 Newark, NJ
Meeting 401(k) audit requirements is both a regulatory obligation and an opportunity to verify your Newark, NJ company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s experience in assisting Newark, NJ businesses navigate the 401(k) audit helps ease the burden, allowing you to focus on your business while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to book a meeting and let us help you ensure your audit goes smoothly and efficiently. Our team of experts will support you with everything, including document collection through to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Newark, NJ advisor team, contact us online, or call us at 877-930-401(k) to get started.
