401(k) Audit Services in Oakland, CA. For Oakland, CA businesses that offer retirement plans, navigating a 401(k) audit can feel 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 doesn't disproportionately benefit higher-paid employees, there are many factors to consider. 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 be a major source of stress 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 Oakland, CA, or looking to streamline a previously cumbersome process, 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 yearly review required for Oakland, CA companies with more than 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 still need an audit if there are 100 who are eligible. The audit verifies that the retirement plan adheres to the regulations set by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s overall financial health, ensuring that contributions, distributions, and operations are faithfully recorded.
While required for regulatory purposes, 401(k) audits can be complicated and lengthy. Correct Capital assists Oakland, CA businesses navigate these audits by aiding in document collection, helping clarify compliance testing, as well as other audit processes. With an experienced team by your side, getting through the audit can become a much easier process.
Why are 401(k) Audits Necessary for Oakland, CA Companies?
You need to undergo a 401(k) audit for multiple purposes, to ensure retirement plans stay in line with federal regulations and protect both the employer and employees. Here’s why they are necessary:
- Compliance with DOL and IRS Regulations: A 401(k) audit guarantees that your 401(k) plan follows all legal requirements mandated by the Department of Labor (DOL) and the IRS, with emphasis 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 called “top-heavy” testing) to ensure the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, withdrawals, or additional plan operations, allowing you to correct these issues before they result in penalties.
- Filing Form 5500: The audit guarantees proper and timely submission of Form 5500, an annual report summarizing the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions do not exceed IRS contribution limits, preventing excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may examine plan fees to verify they are reasonable and don’t pose an excessive cost for participants. Excessive fees may prompt compliance concerns and negatively impact the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit confirms that Oakland, CA employers are working to benefit 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 consistent 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 Oakland, CA employers might come across, depending on factors such as the size and nature 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 thorough audit necessary for most larger 401(k) plans. In a full-scope audit, the external auditor examines every part 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: Previously called a "Limited Scope Audit," these are for plans with investments overseen 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 certified by the financial institution, which can greatly lessen the audit’s complexity and cost. This may make it a preferable choice for some Oakland, CA businesses, as long as they meet the criteria.
The type of audit you need depends on your plan’s specific details, including the nature of its investments. At Correct Capital, we will guide you to understand which type of audit your plan needs and help you be well-prepared for both audit types.
401(k) Audit Pain Points for Oakland, CA Employers
While 401(k) audits are necessary for compliance, they frequently pose difficulties for Oakland, CA employers, especially those managing larger plans. These are some of the major issues that companies deal with:
- Document Collection and Management: Gathering the right documents, such as account statements, tax returns, and employee data, can be labor-intensive. Employers may find it challenging to organize and deliver the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with changing DOL, IRS, and ERISA regulations can be challenging. Compliance errors can result in audit failures, penalties, and costly corrections in the long run.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy involves detailed compliance reviews and can result in additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit takes HR professionals, business owners, administrators, and others away from their core responsibilities, heightening pressure and diverting attention from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 accurately and on time, which is essential to 401(k) compliance. Late submissions could cause penalties and create further issues for the company.
At Correct Capital, we are aware of the difficulties involved and deliver personalized help to make the audit process in Oakland, CA less stressful. Be it document collection or ensuring compliance 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 Oakland, CA employers seeking to reduce the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can offer relief. These plans permit various businesses to participate in a unified 401(k) plan, frequently removing 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 permits Oakland, CA businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs permit unrelated employers to enter a unified 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and reduces costs, making it appealing for Oakland, CA businesses seeking to simplify 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 especially appealing to smaller businesses in Oakland, CA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Oakland, CA 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place can greatly improve the process. Partnering with professionals that is well-versed in both the technicalities and practicalities of the audit process can save you significant time and stress. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A highly experienced group is knowledgeable about 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 helps you remain up to date with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will partner with you to understand the unique needs of your plan and guide you in preparing 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, which allows us to understand the nuances of any company 401(k) plan.
- Saving Time and Resources: Getting ready for a 401(k) audit can distract you significantly from day-to-day operations. The proper team will handle most of the administrative tasks, giving your HR and finance teams to focus on other priorities. Correct Capital makes the process smoother, reducing the pressure on your internal team.
- MEPs and PEPs Expertise: For businesses enrolled in an MEP or PEP, while an individual plan audit is no longer necessary, you're still required to comply with 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 Oakland, CA runs efficiently and stress-free. With Correct Capital supporting you, you’ll feel secure that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Oakland, CA
Meeting 401(k) audit requirements is both a mandatory process and an opportunity to ensure your Oakland, CA company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s knowledge of helping Oakland, CA businesses navigate the 401(k) audit lightens the load, letting you prioritize your business while preventing penalties for non-compliance.
Contact Correct Capital today to book a meeting and allow us to assist you ensure your audit goes smoothly and efficiently. Our team of experts will support you with everything, including document collection through to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Oakland, CA advisor team, contact us online, or call us at 877-930-401(k) to begin.
