401(k) Audit Services in Rochester, NY. For Rochester, NY 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, collecting extensive documentation, and ensuring that your plan isn’t “top-heavy”, 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 be a major source of stress even though they are mandatory. Our team will assist you with every aspect of document collection through making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in Rochester, NY, or looking to streamline 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.
About 401(k) Audits
A 401(k) audit is an annual review mandated for Rochester, NY companies with at least 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 have the option to participate if they wanted. The audit confirms that the retirement plan adheres to the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s financial integrity, ensuring that employee contributions, distributions, and operations are faithfully recorded.
While necessary for compliance, 401(k) audits can be challenging and lengthy. Correct Capital helps Rochester, NY businesses get ready for these audits by assisting with document collection, helping clarify compliance testing, as well as other audit processes. With the right support, getting through the audit can become a much easier process.
Why are 401(k) Audits Necessary for Rochester, NY Companies?
You must undergo a 401(k) audit for several reasons, ensuring that retirement plans stay in line with 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 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 disproportionately benefits higher-paid employees (often known as “top-heavy” testing) in order to promote fairness across all participants.
- Identifying Operational Issues: Audits can uncover errors in employee contributions, distributions, or other facets of plan oversight, allowing you to correct these issues before they result in penalties.
- Filing Form 5500: The audit ensures proper and timely submission of Form 5500, a required document summarizing the plan’s financial status, which is required to maintain compliance with DOL and IRS regulations.
- Contribution Limits: The audit verifies that employer and employee contributions remain within IRS contribution limits, helping to avoid excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may examine plan fees to ensure they are reasonable and aren’t unnecessarily high for participants. High fees can raise compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit confirms that Rochester, NY employers are working to benefit plan participants, fulfilling their fiduciary responsibilities as mandated 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 main categories of 401(k) audits that Rochester, NY 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 most detailed audit mandated for most larger 401(k) plans. In a full-scope audit, the external auditor examines every part 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, distributions, and other transactions to ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Previously referred to 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 qualify 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 significantly reduce the audit’s complexity and cost. This may make it a preferable choice for some Rochester, NY businesses, if they satisfy the criteria.
The kind of audit your plan needs 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 make sure you're ready for either process.
401(k) Audit Pain Points for Rochester, NY Employers
While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Rochester, NY employers, notably those overseeing more substantial retirement plans. Here are some of the key pain points that employers encounter:
- Document Collection and Management: Assembling the required files, such as account statements, tax returns, and employee data, can be a lengthy process. Employers often struggle to organize and file the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with evolving DOL, IRS, and ERISA regulations can be challenging. Compliance errors can cause audit failures, fines, and pricey amendments down the line.
- Discrimination Testing: Verifying that the plan isn’t top-heavy demands thorough checks for compliance and can lead to additional documentation and reporting.
- Time and Resource Demands: Audit preparation pulls HR professionals, business owners, administrators, and others off of their core responsibilities, adding strain and diverting attention from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 accurately and on time, which is a key component of 401(k) compliance. Missing the deadline could cause 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 Rochester, NY. Whether it’s helping with document collection or verifying adherence to 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 Rochester, NY employers looking to lower the workload of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can provide solutions. These plans permit various businesses to consolidate into one 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 allows Rochester, NY businesses to distribute the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs permit unrelated employers to participate in a collective 401(k) plan overseen by a pooled plan provider (PPP). This structure makes meeting regulations easier and cuts costs, making it appealing for Rochester, NY businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, while still ensuring compliance with federal regulations. Moving to one of these plans may be especially appealing to smaller businesses in Rochester, NY, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Rochester, NY 401(k) Audit Team
401(k) audits can seem difficult, but having the right team in place changes everything. Partnering with professionals that understands both the technical and practical aspects 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 team of experts 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 highlight areas for enhancement within your plan.
- Compliance Assurance: The right team will help you stay on top of evolving regulations, making sure your plan complies with all required guidelines.
- Tailored Support: Every 401(k) plan is different. An experienced team will collaborate with you to grasp the unique needs of your plan and assist you in getting ready 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: Audit preparation can distract you significantly from day-to-day operations. The right partner will shoulder a lot of the admin work, giving your HR and finance teams the ability to address other important matters. Correct Capital helps streamline the process, easing the load for your internal team.
- MEPs and PEPs Expertise: For businesses enrolled in an MEP or PEP, while an audit specific to your plan is not required, 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 Rochester, NY runs efficiently and stress-free. With Correct Capital supporting you, you’ll have the confidence that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Rochester, NY
Meeting 401(k) audit requirements is both a regulatory obligation and an opportunity to ensure your Rochester, NY company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s experience in assisting Rochester, NY businesses complete the 401(k) audit lightens the load, letting you prioritize your business while preventing penalties for non-compliance.
Contact Correct Capital today to arrange a session and let us help you ensure your audit goes smoothly and efficiently. Our team of experts will help with all aspects 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 Rochester, NY advisor team, contact us online, or call us at 877-930-401(k) to get started.
