401(k) Audit Services in Pasadena, TX. For Pasadena, TX businesses that offer retirement plans, navigating a 401(k) audit can seem like an uphill battle. Between regulation from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan doesn't disproportionately benefit higher-paid employees, there is a lot to keep track of. However, with the right support, the 401(k) audit does not need to disrupt your business and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can be a major source of stress and are a regulatory requirement. Our team will assist you for everything from document collection through meeting Form 5500 deadlines. Whether you're preparing for your first audit in Pasadena, TX, or hoping to optimize a process that's usually a burden, we're here to ensure it’s as smooth and easy as possible. You can ask for 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 annual review required for Pasadena, TX companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively enrolled in the plan, you are still required to have an audit if there are 100 who have the option to participate if they wanted. The audit verifies that the retirement plan follows the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s financial integrity, ensuring that contributions, withdrawals, and plan activities are properly documented.
While necessary for compliance, 401(k) audits can be challenging and time-consuming. Correct Capital supports Pasadena, TX businesses get ready for these audits by helping with 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 Pasadena, TX Companies?
You need to undergo a 401(k) audit for multiple purposes, ensuring that 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 established by the Department of Labor (DOL) and the IRS, particularly 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 guarantee the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits often expose errors in contributions, withdrawals, or additional plan operations, providing an opportunity to fix these issues so they don't lead to fines.
- Filing Form 5500: The audit confirms proper and timely submission of Form 5500, an annual report detailing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions stay within IRS limits for the year, preventing excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may examine plan fees to confirm they are reasonable and aren’t unnecessarily high for participants. Excessive fees may prompt compliance concerns and negatively impact the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit verifies that Pasadena, TX employers are acting in the best interest of plan participants, meeting their fiduciary responsibilities as required 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 kinds of 401(k) audits that Pasadena, TX 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 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 reviews 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 managed 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 certified by the financial institution, which can significantly reduce the audit’s complexity and cost. This could make it a preferable choice for some Pasadena, TX businesses, provided they meet the criteria.
The specific audit required depends on your plan’s unique features, including the nature of its investments. At Correct Capital, we are able to assist you figure out which type of audit your plan is subject to and help you be well-prepared for either process.
401(k) Audit Pain Points for Pasadena, TX Employers
While 401(k) audits are necessary for compliance, they frequently pose difficulties for Pasadena, TX employers, especially those running bigger 401(k) plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Assembling the necessary paperwork, such as account statements, tax returns, and employee data, can be a lengthy process. Employers may find it challenging to organize and file the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with changing DOL, IRS, and ERISA regulations can be challenging. Compliance oversights can lead to audit failures, sanctions, and costly corrections down the line.
- Discrimination Testing: Making sure that the plan doesn't favor higher earning employees 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 off of their core responsibilities, heightening pressure and distracting them from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 correctly and before the deadline, which plays a critical role in 401(k) compliance. Missing the deadline may lead to penalties and cause additional problems for the company.
At Correct Capital, we recognize these obstacles and deliver personalized help to make the audit process in Pasadena, TX more efficient. From assisting with document collection or ensuring compliance 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 Pasadena, TX employers seeking to reduce the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can ease the process. These plans enable different employers to join a single 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, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup allows Pasadena, TX businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs enable unrelated employers to participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure simplifies compliance and reduces costs, making it a desirable option for Pasadena, TX businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, all while maintaining adherence to regulations. Moving to one of these plans may be especially appealing to smaller businesses in Pasadena, TX, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Pasadena, TX 401(k) Audit Team
401(k) audits can seem difficult, but choosing the right support can make all the difference. Working with a team that is well-versed in both the technicalities and practicalities of the audit process reduces the time and pressure you face. Here’s why partnering with the right experts matters:
- Experience and Expertise: A team of experts will be familiar with the nuances of 401(k) audits, covering both full-scope and limited-scope audits. We help you navigate the documentation process and highlight areas for enhancement within your plan.
- Compliance Assurance: The right team will help you stay on top of evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Every 401(k) plan is different. An experienced team will partner with you to understand the unique needs of your plan and help you prepare 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 take considerable time away from day-to-day operations. The ideal support will handle most of the administrative tasks, allowing your HR and finance teams to focus on other priorities. Correct Capital simplifies the entire process, reducing the pressure on 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 mandated, you're still responsible for following all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Partnering with a well-informed, reliable team is crucial for guaranteeing your 401(k) audit in Pasadena, TX goes as smoothly as possible. 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 Pasadena, TX
Complying with 401(k) audits is both a legal requirement and an important way to confirm your Pasadena, TX company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s expertise in guiding Pasadena, TX businesses complete the 401(k) audit reduces the strain, enabling you to concentrate on your operations while ensuring you're not penalized 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, making sure your plan is set up for success. You can schedule a meeting with a member of our Pasadena, TX advisor team, contact us online, or call us at 877-930-401(k) to start the process.
