401(k) Audit Services in San Jose, CA. For San Jose, CA businesses offering their employees retirement plans, navigating a 401(k) audit can seem like an uphill battle. Between regulation from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan doesn't favor 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 cause considerable frustration 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 getting ready for your initial audit in San Jose, CA, or seeking to simplify a process that's usually a burden, we're here to ensure it’s as smooth and easy 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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What is a 401(k) Audit?
A 401(k) audit is an yearly review mandated for San Jose, CA companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively enrolled in 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 adheres to the regulations set by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s financial integrity, ensuring that employee contributions, withdrawals, and operations are faithfully recorded.
While necessary for compliance, 401(k) audits can be complicated and time-consuming. Correct Capital supports San Jose, CA 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, navigating the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for San Jose, CA Companies?
You need to undergo a 401(k) audit for several reasons, ensuring that retirement plans remain compliant with federal regulations and protect both the employer and employees. Here’s why they are necessary:
- 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, with emphasis under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit checks if the plan does not unfairly favor higher-paid employees (often referred to as “top-heavy” testing) in order to promote fairness across all participants.
- Identifying Operational Issues: Audits often expose errors in employee contributions, distributions, or additional plan operations, providing an opportunity to fix these issues so they don't lead to penalties.
- Filing Form 5500: The audit confirms 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, preventing excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to confirm they are reasonable and aren’t unnecessarily high for participants. High fees can raise compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit confirms that San Jose, CA employers are working to benefit plan participants, satisfying their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Confirming that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is a critical part of the audit.
Types of 401(k) Audits
There are two kinds of 401(k) audits that San Jose, CA employers may encounter, 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, conformance 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 apply to plans with investments managed 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 endorsed by the financial institution, which can substantially lower the audit’s complexity and cost. This could make it a better alternative for some San Jose, CA businesses, as long as they meet the criteria.
The type of audit you need is determined by your plan’s particular characteristics, including the nature of its investments. At Correct Capital, we will guide you to determine which type of audit your plan requires and ensure you're fully prepared for either process.
401(k) Audit Pain Points for San Jose, CA Employers
While 401(k) audits are required to meet legal obligations, they frequently pose difficulties for San Jose, CA employers, especially those overseeing more substantial retirement plans. These are some of the major issues that companies deal with:
- Document Collection and Management: Gathering the required files, such as account statements, tax returns, and employee data, can be labor-intensive. Employers often struggle to arrange and deliver the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with changing DOL, IRS, and ERISA regulations is difficult. Compliance errors can result in audit failures, sanctions, and pricey amendments in the long run.
- Discrimination Testing: Verifying that the plan doesn't favor higher earning employees demands thorough checks for compliance and can result in additional documentation and reporting.
- Time and Resource Demands: Audit preparation takes HR professionals, business owners, administrators, and others out of their core responsibilities, increasing stress and diverting attention from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 accurately and on time, which is essential to 401(k) compliance. Missing the deadline could cause penalties and cause additional problems for the company.
At Correct Capital, we understand these challenges and provide tailored support to streamline the audit procedure in San Jose, CA. 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 San Jose, CA employers seeking to reduce the workload of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs 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, reducing the cost and complexity of managing and auditing individual plans. This setup permits San Jose, CA businesses to divide the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs enable unrelated employers to participate in a collective 401(k) plan overseen by a pooled plan provider (PPP). This structure makes meeting regulations easier and lowers expenses, making it appealing for San Jose, CA businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while still ensuring compliance with federal regulations. Transitioning into an MEP or PEP may be especially appealing to smaller businesses in San Jose, CA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right San Jose, CA 401(k) Audit Team
401(k) audits can seem difficult, but choosing the right support changes everything. Partnering with professionals that is well-versed in both the technicalities and practicalities of the audit process helps you avoid unnecessary delays and anxiety. Here’s why partnering with the right experts matters:
- Experience and Expertise: A highly experienced group will be familiar with the complexities of 401(k) audits, including both full-scope and limited-scope audits. We help you navigate the documentation process and pinpoint potential improvements within your plan.
- Compliance Assurance: The right team helps you remain up to date with 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 identify the unique needs of your plan and help you prepare 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, which allows us to understand the nuances of any company 401(k) plan.
- Saving Time and Resources: Preparing for a 401(k) audit can consume a lot of time from day-to-day operations. The ideal support will handle most of the administrative tasks, allowing your HR and finance teams to focus on other priorities. Correct Capital makes the process smoother, 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 no longer necessary, you're still obligated to adhere to all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Partnering with a well-informed, reliable team is crucial for guaranteeing your 401(k) audit in San Jose, CA is as painless as possible. With Correct Capital as your partner, 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 Jose, CA
Meeting 401(k) audit requirements is both a regulatory obligation and an opportunity to verify your San Jose, CA company's retirement plan stays advantageous to your employees. Correct Capital’s experience in assisting San Jose, CA businesses through the 401(k) audit reduces the strain, letting you prioritize your business while avoiding fines for non-compliance.
Contact Correct Capital today to book a meeting and allow us to assist you prepare for a smooth, efficient audit. Our team of experts will help with all aspects 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 San Jose, CA advisor team, contact us online, or call us at 877-930-401(k) to get started.