401(k) Audit Services in Riverside, CA. For Riverside, CA businesses offering their employees retirement plans, navigating a 401(k) audit can seem like an uphill battle. Between regulation from the Department of Labor (DOL) and IRS, collecting extensive documentation, and ensuring that your plan isn’t “top-heavy”, it can be overwhelming. However, with the right support, the 401(k) audit does not need to disrupt your business and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can be a major source of stress and are mandatory. Our team will assist you with every aspect of document collection through meeting Form 5500 deadlines. Whether you're preparing for your first audit in Riverside, CA, or hoping to optimize 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, 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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What is a 401(k) Audit?
A 401(k) audit is an yearly review mandated for Riverside, CA companies with more than 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively participating in the plan, you still need an audit if there are 100 who have the option to participate if they wanted. The audit confirms that the retirement plan complies with 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 faithfully recorded.
While necessary for compliance, 401(k) audits can be challenging and demanding. Correct Capital assists Riverside, CA businesses prepare for these audits by helping with document collection, ensuring comprehension of compliance testing, as well as other audit processes. With an experienced team in your corner, getting through the audit can become a much easier process.
Why are 401(k) Audits Necessary for Riverside, CA Companies?
You must undergo a 401(k) audit for several reasons, to ensure 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: A 401(k) audit guarantees that your 401(k) plan follows all legal requirements set 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 called “top-heavy” testing) to guarantee fairness across all participants.
- Identifying Operational Issues: Audits often expose errors in employee contributions, withdrawals, or additional plan operations, providing an opportunity to fix these issues to avoid fines.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a required document that outlines the plan’s financial status, which is required to maintain compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions do not exceed IRS contribution limits, reducing the risk of excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may review plan fees to verify they are reasonable and don’t pose an excessive cost for participants. High fees can raise compliance concerns and hurt how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Riverside, CA employers are acting in the best interest of plan participants, satisfying their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Ensuring 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 main categories of 401(k) audits that Riverside, CA employers might come across, 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 examines every part of the plan, including financial statements, adherence to Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates supporting documentation for contributions, distributions, 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 pertain to plans with investments overseen 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 does not need to audit the investment information verified by the financial institution, which can significantly reduce the audit’s complexity and cost. This may make it a more attractive option for some Riverside, CA businesses, if they satisfy the criteria.
The type of audit you need is determined by your plan’s particular characteristics, like the nature of its investments. At Correct Capital, we are able to assist you understand which type of audit your plan requires and make sure you're ready for both audit types.
401(k) Audit Pain Points for Riverside, CA Employers
While 401(k) audits are necessary for compliance, they frequently pose difficulties for Riverside, CA employers, particularly those running bigger 401(k) plans. These are some of the major issues that companies deal with:
- Document Collection and Management: Collecting the right documents, such as account statements, tax returns, and employee data, can be time-consuming. Employers frequently have difficulties to sort through and file the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with shifting DOL, IRS, and ERISA regulations is difficult. Compliance errors can result in audit failures, penalties, and pricey amendments later on.
- 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: Audit preparation takes HR professionals, business owners, administrators, and others out of their core responsibilities, heightening pressure and diverting attention from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 correctly and before the deadline, which is essential to 401(k) compliance. Failing to meet the submission date can result in penalties and cause additional problems for the company.
At Correct Capital, we recognize these obstacles and offer customized assistance to streamline the audit procedure in Riverside, CA. 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 Riverside, CA employers hoping to ease the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can ease the process. These plans permit various businesses to join a single 401(k) plan, frequently removing employer-specific audits.
- Multiple Employer Plans (MEP): These plans pool together several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup permits Riverside, CA businesses to divide the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs allow unrelated employers to enter a unified 401(k) plan overseen by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it a desirable option for Riverside, CA businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while still ensuring compliance with federal regulations. Switching to these types of plans may be particularly attractive for small companies in Riverside, CA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Riverside, CA 401(k) Audit Team
401(k) audits can seem difficult, but choosing the right support changes everything. Collaborating with experts that understands both the technical and practical aspects 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 skilled team is knowledgeable about the details of 401(k) audits, including both full-scope and limited-scope audits. We will assist you with the documentation process and highlight areas for enhancement within your plan.
- Compliance Assurance: The right team ensures you keep up with evolving regulations, ensuring that your plan meets all necessary standards.
- Tailored Support: Every 401(k) plan is different. An experienced team will collaborate 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, with more than $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 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 the freedom to concentrate on other tasks. Correct Capital helps streamline the process, taking the stress off 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 obligated to adhere to all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Collaborating with a well-informed, reliable team is crucial for guaranteeing your 401(k) audit in Riverside, CA is as painless as possible. With Correct Capital by your side, 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 Riverside, CA
Complying with 401(k) audits is both a regulatory obligation and an important way to confirm your Riverside, CA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s experience in assisting Riverside, CA businesses navigate the 401(k) audit helps ease the burden, enabling you to concentrate on your operations while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to schedule a consultation and we'll guide you ensure your audit goes smoothly and efficiently. Our team of experts will support you with everything, including document collection to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Riverside, CA advisor team, contact us online, or call us at 877-930-401(k) to start the process.
