401(k) Audit Services in Salinas, CA. For Salinas, CA businesses that offer retirement plans, completing a 401(k) audit can feel like an uphill battle. Between regulation from the Department of Labor (DOL) and IRS, organizing necessary documents, 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 does not need to disrupt your business and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches even though they cannot be avoided. Our team will work with you with every aspect of document collection through making sure Form 5500 is filed correctly and on time. Whether you're preparing for your first audit in Salinas, CA, or hoping to optimize a previously cumbersome 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, contact us online, 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 yearly review necessary for Salinas, CA companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively enrolled in the plan, you must still undergo an audit if there are 100 who are eligible. 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 reviews the plan’s overall financial health, ensuring that contributions, withdrawals, and plan activities are faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be challenging and demanding. Correct Capital helps Salinas, CA businesses prepare for these audits by assisting with document collection, assisting with understanding compliance testing, etc... With the right support, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Salinas, CA Companies?
You are required to undergo a 401(k) audit for a variety of reasons, ensuring that retirement plans remain compliant with federal regulations and protect both the employer and employees. Here’s why you need them:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm that your 401(k) plan follows 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 verifies whether the plan does not unfairly favor higher-paid employees (often referred to as “top-heavy” testing) to ensure the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in contributions, distributions, or additional plan operations, enabling you to resolve these issues so they don't lead to fines.
- Filing Form 5500: The audit confirms the accurate and on-time filing of Form 5500, a yearly filing detailing the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions remain within IRS limits for the year, reducing the risk of excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to verify they are reasonable and don’t pose an excessive cost for participants. Overpriced fees could lead to compliance concerns and affect how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Salinas, CA employers are working to benefit 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 kinds of 401(k) audits that Salinas, CA employers may encounter, depending on factors such as the size and nature 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 thorough audit required for most larger 401(k) plans. In a full-scope audit, the independent auditor evaluates all components of the plan, which includes 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 held 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 certified by the financial institution, which can substantially lower the audit’s complexity and cost. This may make it a more attractive option for some Salinas, CA businesses, provided they meet the criteria.
The type of audit you need is based on your plan’s particular characteristics, like the nature of its investments. At Correct Capital, we will guide you to figure out which type of audit your plan needs and make sure you're ready for both audit types.
401(k) Audit Pain Points for Salinas, CA Employers
While 401(k) audits must be conducted to ensure compliance, they often present significant challenges for Salinas, CA employers, particularly those overseeing more substantial retirement plans. Below are several common challenges that businesses face:
- 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 sort through and deliver the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with changing DOL, IRS, and ERISA regulations can be challenging. Compliance missteps can result in audit failures, fines, and expensive fixes in the long run.
- Discrimination Testing: Making sure that the plan doesn't favor higher earning employees involves detailed compliance reviews and can result in additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit takes HR professionals, business owners, administrators, and others out of their core responsibilities, adding strain and diverting attention from day-to-day operations.
- 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. Late submissions may lead to penalties and cause additional problems for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to make the audit process in Salinas, CA more efficient. From assisting 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 Salinas, CA employers hoping to ease the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can offer relief. These plans allow unrelated employers to participate in a unified 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans pool together several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup permits Salinas, CA businesses to distribute the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs permit unrelated employers to participate in a collective 401(k) plan overseen by a pooled plan provider (PPP). This structure streamlines the regulatory process and reduces costs, making it a desirable option for Salinas, CA businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while ensuring regulatory compliance. Switching to these types of plans may be particularly attractive for small companies in Salinas, CA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Salinas, CA 401(k) Audit Team
401(k) audits can seem difficult, but selecting the proper assistance can make all the difference. Collaborating with experts 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 having the right experts on your side is important:
- Experience and Expertise: A skilled team is knowledgeable about the complexities of 401(k) audits, covering both full-scope and limited-scope audits. We can guide you through 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: All 401(k) plans are distinct. An experienced team will work closely with you to grasp 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, giving us the expertise to handle any company 401(k) plan.
- Saving Time and Resources: Getting ready for a 401(k) audit can distract you significantly from day-to-day operations. The proper team will shoulder a lot of the admin work, giving 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 separate audit is not required, 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
Partnering with a knowledgeable, reliable team is essential to making sure your 401(k) audit in Salinas, CA goes as smoothly as possible. With Correct Capital as your partner, you’ll be assured that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in Salinas, CA
Complying with 401(k) audits is both a mandatory process and an opportunity to ensure your Salinas, CA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s knowledge of helping Salinas, CA businesses navigate the 401(k) audit helps ease the burden, 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 assist with everything from document collection to compliance checks, making sure your plan is set up for success. You can schedule a meeting with a member of our Salinas, CA advisor team, contact us online, or call us at 877-930-401(k) to start the process.
