401(k) Audit Services in Santa Clarita, CA. For Santa Clarita, CA businesses offering their employees retirement plans, completing 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, there are many factors to consider. 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 be a major source of stress and are mandatory. 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 preparing for your first audit in Santa Clarita, CA, or hoping to optimize a previously inefficient process, we're here to minimize the hassle. 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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What is a 401(k) Audit?
A 401(k) audit is an yearly review mandated for Santa Clarita, CA companies with 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 are still required to have an audit if there are 100 who are eligible. The audit ensures that the retirement plan follows the regulations set by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s overall financial health, ensuring that employee contributions, distributions, and plan activities are properly documented.
While necessary for compliance, 401(k) audits can be complicated and demanding. Correct Capital helps Santa Clarita, CA businesses get ready for these audits by aiding in document collection, helping clarify compliance testing, and other related tasks. With an experienced team by your side, navigating the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Santa Clarita, CA Companies?
You are required to undergo a 401(k) audit for multiple purposes, to ensure retirement plans adhere to federal regulations and protect both the employer and employees. Here’s why you need them:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan adheres to all legal requirements mandated 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 isn't overly advantageous to higher-paid employees (often referred to as “top-heavy” testing) in order to promote fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, distributions, or additional plan operations, allowing you to correct these issues so they don't lead to penalties.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, an annual report detailing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions do not exceed IRS contribution limits, reducing the risk of excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may examine plan fees to ensure they are reasonable and aren’t unnecessarily high for participants. Overpriced fees could lead to compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Santa Clarita, CA employers are serving the interests of plan participants, satisfying their fiduciary responsibilities as mandated by 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 kinds of 401(k) audits that Santa Clarita, CA employers might come across, based on the specific details 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 necessary for most larger 401(k) plans. In a full-scope audit, the external auditor reviews all aspects of the plan, such as financial statements, adherence to 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 overseen 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 certified by the financial institution, which can greatly lessen the audit’s complexity and cost. This could make it a preferable choice for some Santa Clarita, CA businesses, as long as they meet the criteria.
The type of audit you need depends on your plan’s unique features, like the nature of its investments. At Correct Capital, we can help you determine which type of audit your plan requires and help you be well-prepared for both audit types.
401(k) Audit Pain Points for Santa Clarita, CA Employers
While 401(k) audits are required to meet legal obligations, they can create major obstacles for Santa Clarita, CA employers, especially those overseeing more substantial retirement plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Gathering the required files, such as account statements, tax returns, and employee data, can be time-consuming. Employers often struggle to arrange and file the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with shifting DOL, IRS, and ERISA regulations can prove difficult. Compliance oversights can result in audit failures, penalties, and costly corrections later on.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy demands thorough checks for compliance and can necessitate additional documentation and reporting.
- Time and Resource Demands: Audit preparation takes HR professionals, business owners, administrators, and others away from their core responsibilities, increasing stress and shifting focus from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 properly and punctually, which is a key component of 401(k) compliance. Late submissions could cause penalties and complicate things for the company.
At Correct Capital, we recognize these obstacles and provide tailored support to make the audit process in Santa Clarita, CA more efficient. Whether it’s helping 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 Santa Clarita, CA employers looking to lower the workload of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can offer relief. These plans allow unrelated employers to participate in a unified 401(k) plan, frequently removing employer-specific audits.
- Multiple Employer Plans (MEP): These plans pool together several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup enables Santa Clarita, CA businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, 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 a desirable option for Santa Clarita, CA businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while ensuring regulatory compliance. Switching to these types of plans may be particularly attractive for small companies in Santa Clarita, CA, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Santa Clarita, CA 401(k) Audit Team
401(k) audits can seem difficult, but choosing the right support can make all the difference. Working with a team that is well-versed in both the technicalities and practicalities of the audit process reduces the time and pressure you face. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A highly experienced group is knowledgeable about the complexities of 401(k) audits, encompassing full-scope and limited-scope audits. We help you navigate the documentation process and highlight areas for enhancement 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 work closely with you to understand the unique needs of your plan and guide you in preparing for your specific audit requirements. Correct Capital currently manages over 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: Audit preparation can distract you significantly from day-to-day operations. The ideal support will take on much of the administrative burden, enabling your HR and finance teams to focus on other priorities. Correct Capital simplifies the entire process, taking the stress off your internal team.
- MEPs and PEPs Expertise: For businesses in a Multiple Employer Plan (MEP) or Pooled Employer Plan (PEP), while an audit specific to your plan is not required, you're still obligated to adhere to all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Collaborating with a well-informed, reliable team is essential to making sure your 401(k) audit in Santa Clarita, CA goes as smoothly as possible. With Correct Capital by your side, 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 Santa Clarita, CA
Adhering to 401(k) audit regulations is both a legal requirement and an opportunity to verify your Santa Clarita, CA company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s experience in assisting Santa Clarita, CA businesses through the 401(k) audit helps ease the burden, allowing you to focus on your business while preventing penalties for non-compliance.
Contact Correct Capital today to arrange a session and we'll guide you ensure your audit goes smoothly and efficiently. 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 Santa Clarita, CA advisor team, contact us online, or call us at 877-930-401(k) to get started.