401(k) Audit Services in Scottsdale, AZ. For Scottsdale, AZ businesses offering their employees retirement plans, completing a 401(k) audit can seem like a daunting task. Between regulation from the Department of Labor (DOL) and IRS, gathering a large amount of paperwork, 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 can be made much easier and interfere with your company’s daily operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches even though they are a regulatory requirement. Our team will partner with you for everything from document collection through making sure Form 5500 is filed correctly and on time. Whether you're preparing for your first audit in Scottsdale, AZ, or looking to streamline a previously cumbersome process, we're here to minimize the hassle. You can ask for 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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What is a 401(k) Audit?
A 401(k) audit is an yearly review necessary for Scottsdale, AZ 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 contributing to the plan, you still need an audit if there are 100 who have the option to participate if they wanted. The audit confirms that the retirement plan adheres to the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s overall financial health, ensuring that contributions, distributions, and operations are faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be complex and lengthy. Correct Capital supports Scottsdale, AZ businesses get ready for these audits by assisting with document collection, assisting with understanding compliance testing, and other related tasks. With an experienced team by your side, handling the audit process can become a far more manageable task.
Why are 401(k) Audits Necessary for Scottsdale, AZ Companies?
You must undergo a 401(k) audit for several reasons, ensuring that retirement plans adhere to federal regulations and safeguard both the employer and employees. Here’s why you need them:
- Compliance with DOL and IRS Regulations: A 401(k) audit guarantees that your 401(k) plan follows all legal requirements established by the Department of Labor (DOL) and the IRS, with emphasis 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 called “top-heavy” testing) in order to promote fairness across all participants.
- Identifying Operational Issues: Audits often expose errors in contributions, withdrawals, or other aspects of plan management, providing an opportunity to fix these issues so they don't lead to penalties.
- Filing Form 5500: The audit ensures 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 stay within IRS limits for the year, reducing the risk of excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may examine plan fees to verify they are reasonable and don’t pose an excessive cost for participants. Overpriced fees could lead to compliance concerns and hurt how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Scottsdale, AZ employers are serving the interests of plan participants, fulfilling 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 a vital part of the audit.
Types of 401(k) Audits
There are two main categories of 401(k) audits that Scottsdale, AZ employers could face, depending on factors such as the size and nature 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 thorough audit required for most larger 401(k) plans. In a full-scope audit, the independent auditor evaluates all components of the plan, such as financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates supporting documentation for contributions, withdrawls, and other transactions to ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Previously called a "Limited Scope Audit," these pertain 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 is not required to audit the investment information endorsed by the financial institution, which can greatly lessen the audit’s complexity and cost. This may make it a better alternative for some Scottsdale, AZ businesses, provided they meet the criteria.
The kind of audit your plan needs is determined by your plan’s specific details, including the nature of its investments. At Correct Capital, we will guide you to figure out which type of audit your plan is subject to and make sure you're ready for either process.
401(k) Audit Pain Points for Scottsdale, AZ Employers
While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Scottsdale, AZ employers, especially those overseeing more substantial retirement plans. Below are several common challenges that companies deal with:
- 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 organize and submit 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 errors can lead to audit failures, penalties, and costly corrections later on.
- Discrimination Testing: Ensuring that the plan doesn't favor higher earning employees demands thorough checks for compliance and can necessitate additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit pulls HR professionals, business owners, administrators, and others away from 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 accurately and on time, which plays a critical role in 401(k) compliance. Missing the deadline can result in penalties and cause additional problems for the company.
At Correct Capital, we understand these challenges and deliver personalized help to make the audit process in Scottsdale, AZ 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 Scottsdale, AZ employers looking to lower the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can provide solutions. These plans allow unrelated employers to join a single 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 allows Scottsdale, AZ businesses to distribute the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs enable unrelated employers to enter a unified 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it attractive for Scottsdale, AZ 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. Moving to one of these plans may be highly beneficial for smaller firms in Scottsdale, AZ, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Scottsdale, AZ 401(k) Audit Team
401(k) audits can seem difficult, but choosing the right support can make all the difference. Collaborating with experts that understands both the technical and practical aspects 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 team of experts will be familiar with the complexities of 401(k) audits, encompassing 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 ensures you keep up with evolving regulations, ensuring that your plan meets all necessary standards.
- Tailored Support: Every 401(k) plan is different. An experienced team will work closely with you to identify the unique needs of your plan and guide you in preparing for your specific audit requirements. Correct Capital handles more than 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 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 to focus on other priorities. Correct Capital makes the process smoother, easing the load for 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 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 well-informed, reliable team is key to ensuring your 401(k) audit in Scottsdale, AZ is as painless as possible. With Correct Capital supporting you, you’ll feel secure that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Scottsdale, AZ
Adhering to 401(k) audit regulations is both a regulatory obligation and an opportunity to ensure your Scottsdale, AZ company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s knowledge of helping Scottsdale, AZ businesses navigate the 401(k) audit reduces the strain, enabling you to concentrate on your operations while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to schedule a consultation and let us help 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 Scottsdale, AZ advisor team, contact us online, or call us at 877-930-401(k) to start the process.
