401(k) Audit Services in Paterson, NJ. For Paterson, NJ businesses offering their employees 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 isn’t “top-heavy”, there are many factors to consider. However, with the right support, the 401(k) audit can be made much easier and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can create significant headaches even though they are mandatory. Our team will assist you for everything from document collection through making sure Form 5500 is filed correctly and on time. Whether you're navigating your first audit in Paterson, NJ, or looking to streamline a previously inefficient process, 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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What is a 401(k) Audit?
A 401(k) audit is an annual review mandated for Paterson, NJ companies with more than 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively contributing to 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 ensures that the retirement plan adheres to the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s financial integrity, ensuring that contributions, withdrawals, and plan activities are faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be complicated and time-consuming. Correct Capital assists Paterson, NJ businesses get ready for these audits by assisting with document collection, assisting with understanding compliance testing, and other related tasks. With the right support, handling the audit process can become a much easier process.
Why are 401(k) Audits Necessary for Paterson, NJ Companies?
You are required to undergo a 401(k) audit for a variety of reasons, ensuring that retirement plans adhere to federal regulations and safeguard 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 mandated by the Department of Labor (DOL) and the IRS, especially 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 known as “top-heavy” testing) in order to promote the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits often expose errors in employee contributions, withdrawals, or additional plan operations, allowing you to correct these issues so they don't lead to fines.
- Filing Form 5500: The audit guarantees the accurate and on-time filing of Form 5500, a required document 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 limits for the year, preventing excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may examine plan fees to verify they are reasonable and don’t pose an excessive cost for participants. High fees can raise compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit confirms that Paterson, NJ employers are acting in the best interest of plan participants, satisfying their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Verifying 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 kinds of 401(k) audits that Paterson, NJ employers may encounter, depending on the size and complexity 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 more comprehensive audit mandated for most larger 401(k) plans. In a full-scope audit, the third-party auditor reviews all aspects of the plan, such as financial statements, adherence to Department of Labor (DOL) and IRS regulations, and participant data. The auditor reviews 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 are for 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 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 better alternative for some Paterson, NJ businesses, if they satisfy the criteria.
The specific audit required is determined by your plan’s particular characteristics, such as the nature of its investments. At Correct Capital, we will guide you to determine which type of audit your plan is subject to and make sure you're ready for both audit types.
401(k) Audit Pain Points for Paterson, NJ Employers
While 401(k) audits are necessary for compliance, they often present significant challenges for Paterson, NJ employers, notably those managing larger plans. Here are some of the key pain points that businesses face:
- Document Collection and Management: Gathering the required files, 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, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with shifting DOL, IRS, and ERISA regulations can be challenging. Compliance oversights can lead to audit failures, fines, and pricey amendments in the long run.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy requires careful compliance checks and can necessitate additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit draws HR professionals, business owners, administrators, and others away from their core responsibilities, adding strain and distracting them from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 correctly and before the deadline, which is essential to 401(k) compliance. Failing to meet the submission date may lead to penalties and create further issues for the company.
At Correct Capital, we recognize these obstacles and offer customized assistance to streamline the audit procedure in Paterson, NJ. 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 Paterson, NJ employers seeking to reduce the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can provide solutions. These plans allow unrelated employers to participate in a unified 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 enables Paterson, NJ businesses to divide the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs allow unrelated employers to participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure streamlines the regulatory process and reduces costs, making it appealing for Paterson, NJ businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, all while maintaining adherence to regulations. Transitioning into an MEP or PEP may be especially appealing to smaller businesses in Paterson, NJ, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Paterson, NJ 401(k) Audit Team
401(k) audits can be daunting, but selecting the proper assistance can greatly improve the process. Collaborating with experts that is well-versed in both the technicalities and practicalities of the audit process helps you avoid unnecessary delays and anxiety. Here’s why having the right experts on your side is important:
- Experience and Expertise: A highly experienced group is knowledgeable about the nuances 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, ensuring that your plan meets all necessary standards.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will work closely with you to identify the unique needs of your plan and guide you in preparing for your specific audit requirements. Correct Capital currently manages 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: Audit preparation can distract you significantly from day-to-day operations. The ideal support will handle most of the administrative tasks, giving 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 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, 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 Paterson, NJ is as painless as possible. With Correct Capital as your partner, you’ll have the confidence that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in Paterson, NJ
Meeting 401(k) audit requirements is both a legal requirement and an opportunity to verify your Paterson, NJ company's retirement plan stays advantageous to your employees. Correct Capital’s expertise in guiding Paterson, 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 schedule a consultation and we'll guide you get ready for a streamlined, effective 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 Paterson, NJ advisor team, contact us online, or call us at 877-930-401(k) to begin.
