401(k) Audit Services in San Francisco, CA. For San Francisco, CA businesses offering their employees retirement plans, navigating a 401(k) audit can feel like a challenging process. 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 doesn’t have to feel like a burden and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches even though they are mandatory. Our team will partner with you with every aspect of document collection through making sure Form 5500 is filed correctly and on time. Whether you're navigating your first audit in San Francisco, CA, or seeking to simplify a previously inefficient process, we're here to ensure it’s as smooth and easy as possible. You can book 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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About 401(k) Audits
A 401(k) audit is an yearly review necessary for San Francisco, CA companies who have more than 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 are still required to have an audit if there are 100 who are eligible. 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 overall financial health, ensuring that employee contributions, distributions, and plan activities are properly documented.
While required for regulatory purposes, 401(k) audits can be complicated and demanding. Correct Capital helps San Francisco, 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 by your side, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for San Francisco, CA Companies?
You are required to undergo a 401(k) audit for multiple purposes, ensuring that retirement plans stay in line 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 complies with all legal requirements established by the Department of Labor (DOL) and the IRS, especially under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit ensures that the plan disproportionately benefits higher-paid employees (often referred to as “top-heavy” testing) to ensure fairness across all participants.
- 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 penalties.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a yearly filing summarizing 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 remain within IRS limits for the year, helping to avoid excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may review plan fees to confirm they are reasonable and not overly expensive for participants. Overpriced fees could lead to compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit verifies that San Francisco, CA employers are acting in the best interest of plan participants, fulfilling their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Ensuring 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 Francisco, CA employers could face, 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 most detailed audit necessary for most larger 401(k) plans. In a full-scope audit, the independent auditor evaluates all components of the plan, including financial statements, conformance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines 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 apply to 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 could make it a preferable choice for some San Francisco, CA businesses, provided they meet the criteria.
The kind of audit your plan needs depends on your plan’s particular characteristics, including the nature of its investments. At Correct Capital, we can help you determine which type of audit your plan needs and make sure you're ready for either process.
401(k) Audit Pain Points for San Francisco, CA Employers
While 401(k) audits are necessary for compliance, they often present significant challenges for San Francisco, CA employers, especially those running bigger 401(k) plans. Here are some of the key pain points that employers encounter:
- Document Collection and Management: Assembling the necessary paperwork, such as account statements, tax returns, and employee data, can be time-consuming. Employers often struggle to sort through and file the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with changing DOL, IRS, and ERISA regulations can prove difficult. Compliance oversights can lead to audit failures, sanctions, and costly corrections later on.
- Discrimination Testing: Verifying that the plan doesn't favor higher earning employees requires careful compliance checks and can necessitate additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit draws HR professionals, business owners, administrators, and others off of their core responsibilities, adding strain and shifting focus from regular business activities.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 correctly and before the deadline, which is a key component of 401(k) compliance. Missing the deadline may lead to penalties and complicate things for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to make the audit process in San Francisco, CA smoother. Whether it’s helping with document collection or ensuring compliance with regulations, our team helps take the burden off your shoulders.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For San Francisco, CA employers hoping to ease the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can offer relief. These plans allow unrelated employers to join a single 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans consolidate several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup allows San Francisco, CA businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs permit unrelated employers to enter a unified 401(k) plan managed by a pooled plan provider (PPP). This structure simplifies compliance and reduces costs, making it appealing for San Francisco, CA businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while still ensuring compliance with federal regulations. Switching to these types of plans may be especially appealing to smaller businesses in San Francisco, CA, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right San Francisco, CA 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place can greatly improve the process. Partnering with professionals that is well-versed in both the technicalities and practicalities of the audit process reduces the time and pressure you face. Here’s why partnering with the right experts matters:
- Experience and Expertise: A skilled team understands the nuances of 401(k) audits, covering both full-scope and limited-scope audits. We can guide you through the documentation process and help identify areas of improvement 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: All 401(k) plans are distinct. An experienced team will collaborate with you to grasp the unique needs of your plan and help you prepare 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, which allows us to understand the nuances of any company 401(k) plan.
- Saving Time and Resources: Audit preparation can consume a lot of time from day-to-day operations. The proper team will shoulder a lot of the admin work, enabling your HR and finance teams the ability to address other important matters. Correct Capital simplifies the entire process, reducing the pressure on your internal team.
- MEPs and PEPs Expertise: For businesses participating in an MEP or PEP, while an individual plan audit is no longer mandated, you're still responsible for following all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Partnering with a experienced, reliable team is crucial for guaranteeing your 401(k) audit in San Francisco, CA goes as smoothly as possible. With Correct Capital supporting you, you’ll feel secure that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in San Francisco, CA
Meeting 401(k) audit requirements is both a mandatory process and an opportunity to ensure your San Francisco, CA company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s experience in assisting San Francisco, CA businesses navigate the 401(k) audit helps ease the burden, allowing you to focus on your business while avoiding fines for non-compliance.
Contact Correct Capital today to arrange a session and allow us to assist you ensure your audit goes smoothly and efficiently. Our team of experts will assist with everything from document collection to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our San Francisco, CA advisor team, contact us online, or call us at 877-930-401(k) to start the process.
