401(k) Audit Sacramento, CA

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401(k) Audit Services in Sacramento, CA. For Sacramento, 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 isn’t “top-heavy”, there are many factors to consider. However, with the right support, the 401(k) audit does not need to disrupt your business and interfere with your company’s daily 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 to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Sacramento, CA, or hoping to optimize 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 required for Sacramento, CA companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively contributing to the plan, you must still undergo an audit if there are 100 who have the option to participate if they wanted. The audit verifies that the retirement plan complies with the regulations set by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s financial integrity, ensuring that employee contributions, distributions, and plan activities are faithfully recorded.

While necessary for compliance, 401(k) audits can be complex and demanding. Correct Capital supports Sacramento, CA businesses get ready for these audits by assisting with document collection, helping clarify compliance testing, as well as other audit processes. With an experienced team in your corner, navigating the audit can become a much easier process.

Why are 401(k) Audits Necessary for Sacramento, CA Companies?

You need to undergo a 401(k) audit for several reasons, ensuring that retirement plans stay in line with federal regulations and protect both the employer and employees. Here’s why they are required:

  • Compliance with DOL and IRS Regulations: The purpose of audits is to confirm that your 401(k) plan complies with all legal requirements set by the Department of Labor (DOL) and the IRS, especially under the Employee Retirement Income Security Act (ERISA).
  • Preventing Discrimination: The audit checks if the plan isn't overly advantageous to higher-paid employees (often known as “top-heavy” testing) in order to promote 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 before they result in fines.
  • Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a required document 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 do not exceed IRS limits for the year, helping to avoid excess contributions that may result in penalties.
  • Fee Reasonableness: Auditors may evaluate plan fees to verify they are reasonable and not overly expensive for participants. Excessive fees may prompt compliance concerns and negatively impact how employees' investments and savings perform.
  • Fiduciary Oversight: The audit confirms that Sacramento, CA employers are acting in the best interest of 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 consistent 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 Sacramento, CA 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 thorough audit mandated for most larger 401(k) plans. In a full-scope audit, the independent auditor evaluates all components of the plan, such as financial statements, adherence to Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines supporting documentation for contributions, withdrawls, and other transactions to verify that everything is accurate and in compliance.
  • Section 103(a)(3)(C)) Audit: Previously referred to as a "Limited Scope Audit," these apply 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 is not required to audit the investment information verified by the financial institution, which can significantly reduce the audit’s complexity and cost. This can make it a more attractive option for some Sacramento, CA businesses, if they satisfy the criteria.

The specific audit required depends on your plan’s specific details, 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 help you be well-prepared for whichever process is necessary.

401(k) Audit Pain Points for Sacramento, CA Employers

While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Sacramento, CA employers, notably those running bigger 401(k) plans. Here are some of the key pain points that companies deal with:

  • Document Collection and Management: Gathering the required files, such as account statements, tax returns, and employee data, can be a lengthy process. Employers often struggle to sort through and file the necessary paperwork, especially for larger, more complex plans.
  • Compliance with Changing Regulations: Staying up to date with changing DOL, IRS, and ERISA regulations can prove difficult. Compliance missteps can cause audit failures, sanctions, and pricey amendments later on.
  • Discrimination Testing: Making sure that the plan isn’t top-heavy involves detailed compliance reviews and can lead to 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 distracting them from everyday business tasks.
  • Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 accurately and on time, which plays a critical role in 401(k) compliance. Missing the deadline can result in 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 Sacramento, CA. From assisting 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 Sacramento, CA employers hoping to ease the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans 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 combine several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup enables Sacramento, CA businesses to share the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
  • Pooled Employer Plans (PEP): A more recent development, PEPs permit unrelated employers to participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it a desirable option for Sacramento, CA businesses looking to streamline their retirement offerings.

Both MEPs and PEPs can substantially decrease the costs and time required for audits, while still ensuring compliance with federal regulations. Moving to one of these plans may be especially appealing to smaller businesses in Sacramento, CA, that want to provide a 401(k) but struggle with the costs and administrative burdens.

Working with the Right Sacramento, CA 401(k) Audit Team

401(k) audits can appear challenging, but selecting the proper assistance can make all the difference. Working with a team that has a firm grasp of both technical and practical elements of the audit process helps you avoid unnecessary delays and anxiety. Here’s why working with the right specialists is crucial:

  • Experience and Expertise: A team of experts understands the complexities of 401(k) audits, encompassing full-scope and limited-scope audits. We help you navigate the documentation process and help identify areas of improvement within your plan.
  • Compliance Assurance: The right team ensures you keep up with evolving regulations, confirming your plan adheres to all regulations.
  • Tailored Support: Every 401(k) plan is different. An experienced team will work closely with you to identify the unique needs of your plan and assist you in getting ready 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: Preparing for a 401(k) audit can take considerable time away from day-to-day operations. The proper team will take on much of the administrative burden, allowing your HR and finance teams the freedom to concentrate on other tasks. Correct Capital simplifies the entire process, easing the load for your internal team.
  • MEPs and PEPs Expertise: For businesses participating in an MEP or PEP, while an individual plan audit is not required, you're still responsible for following all the rules and regulations, just with less administrative burdens after plan year end.

*as of March 2024

Collaborating with a experienced, reliable team is crucial for guaranteeing your 401(k) audit in Sacramento, CA is as painless as possible. With Correct Capital supporting you, you’ll be assured that your audit will be handled with precision and care.

Call Correct Capital for Help With Your 401(k) Audit in Sacramento, CA

Adhering to 401(k) audit regulations is both a legal requirement and an opportunity to ensure your Sacramento, CA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s knowledge of helping Sacramento, CA businesses complete the 401(k) audit reduces the strain, enabling you to concentrate on your operations while avoiding fines for non-compliance.

Contact Correct Capital today to schedule a consultation and we'll guide you prepare for a smooth, efficient audit. Our team of experts will help with all aspects from document collection through to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Sacramento, CA advisor team, contact us online, or call us at 877-930-401(k) to get started.


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