401(k) Audit Services in San Diego, CA. For San Diego, CA businesses offering their employees retirement plans, navigating a 401(k) audit can feel like a daunting task. Between compliance requirements from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan doesn't disproportionately benefit higher-paid employees, it can be overwhelming. 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 even though they are a regulatory requirement. Our team will work with you with every aspect of document collection to making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in San Diego, CA, or looking to streamline a process that's usually a burden, we're here to minimize the hassle. You can book 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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About 401(k) Audits
A 401(k) audit is an yearly review mandated for San Diego, CA companies who have more than 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 ensures that the retirement plan follows the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s overall financial health, ensuring that employee contributions, distributions, and plan activities are accurately represented.
While necessary for compliance, 401(k) audits can be complicated and time-consuming. Correct Capital supports San Diego, CA businesses navigate these audits by helping with document collection, ensuring comprehension of compliance testing, as well as other audit processes. With an experienced team by your side, getting through the audit can become a much easier process.
Why are 401(k) Audits Necessary for San Diego, CA Companies?
You must undergo a 401(k) audit for multiple purposes, 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: The purpose of audits is to confirm that your 401(k) plan complies with all legal requirements mandated by the Department of Labor (DOL) and the IRS, particularly under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit checks if the plan does not unfairly favor 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 may reveal errors in employee contributions, distributions, or other aspects of plan management, allowing you to correct these issues to avoid penalties.
- Filing Form 5500: The audit confirms proper and timely submission of Form 5500, a required document that outlines 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 might trigger penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to ensure they are reasonable and don’t pose an excessive cost for participants. Overpriced fees could lead to compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that San Diego, CA employers are working to benefit plan participants, meeting their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Confirming 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 San Diego, 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 more comprehensive audit required for most larger 401(k) plans. In a full-scope audit, the third-party auditor evaluates all components of the plan, including financial statements, conformance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor reviews supporting documentation for contributions, distributions, and other transactions to confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Formerly known as a "Limited Scope Audit," these apply to 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 substantially lower the audit’s complexity and cost. This could make it a more attractive option for some San Diego, CA businesses, as long as they meet the criteria.
The specific audit required is determined by your plan’s particular characteristics, like the nature of its investments. At Correct Capital, we will guide you to understand which type of audit your plan is subject to and ensure you're fully prepared for whichever process is necessary.
401(k) Audit Pain Points for San Diego, CA Employers
While 401(k) audits are necessary for compliance, they can create major obstacles for San Diego, CA employers, particularly those managing larger plans. Below are several common challenges that businesses face:
- Document Collection and Management: Collecting the necessary paperwork, such as account statements, tax returns, and employee data, can be time-consuming. Employers may find it challenging to sort through and file the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with shifting DOL, IRS, and ERISA regulations can prove difficult. Compliance missteps can cause audit failures, fines, and expensive fixes in the long run.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy involves detailed compliance reviews and can result in additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit takes HR professionals, business owners, administrators, and others out of their core responsibilities, heightening pressure and diverting attention from regular business activities.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 accurately and on time, which is essential to 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 provide tailored support to make the audit process in San Diego, CA more efficient. From assisting with document collection or ensuring compliance 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 San Diego, CA employers hoping to ease the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can ease the process. These plans permit various businesses to join a single 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans combine several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup permits San Diego, CA businesses to divide the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs enable unrelated employers to join a shared 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and lowers expenses, making it appealing for San Diego, CA businesses looking to streamline 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. Transitioning into an MEP or PEP may be particularly attractive for small companies in San Diego, CA, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right San Diego, CA 401(k) Audit Team
401(k) audits can appear challenging, but choosing the right support changes everything. Partnering with professionals that is well-versed in both the technicalities and practicalities 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 will be familiar with the details 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 helps you remain up to date with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Every 401(k) plan is different. An experienced team will partner with you to understand the unique needs of your plan and assist you in getting ready 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 consume a lot of time from day-to-day operations. The right partner will shoulder a lot of the admin work, enabling your HR and finance teams the freedom to concentrate on other tasks. Correct Capital makes the process smoother, 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 not required, you're still required to comply with all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Working with a experienced, reliable team is crucial for guaranteeing your 401(k) audit in San Diego, CA 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 San Diego, CA
Meeting 401(k) audit requirements is both a regulatory obligation and an important way to confirm your San Diego, CA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s experience in assisting San Diego, CA businesses complete the 401(k) audit reduces the strain, letting you prioritize your business while avoiding fines for non-compliance.
Contact Correct Capital today to schedule a consultation and allow us to assist you get ready for a streamlined, effective audit. Our team of experts will assist with everything from document collection to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our San Diego, CA advisor team, contact us online, or call us at 877-930-401(k) to start the process.
