401(k) Audit Services in Springfield, MA. For Springfield, MA businesses that offer retirement plans, navigating a 401(k) audit can seem 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 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 interfere with your company’s daily operations.
At Correct Capital, we understand that 401(k) audits can be a major source of stress and are a regulatory requirement. Our team will work with you with every aspect of document collection through meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Springfield, MA, or seeking to simplify 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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About 401(k) Audits
A 401(k) audit is an annual review mandated for Springfield, MA companies with more than 100 eligible participants in their 401(k) plan. Note: Even if you don’t have more than 100 employees actively enrolled in the plan, you still need an audit if there are 100 who are eligible. The audit confirms that the retirement plan follows the regulations established 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, distributions, and plan activities are faithfully recorded.
While necessary for compliance, 401(k) audits can be challenging and lengthy. Correct Capital assists Springfield, MA businesses prepare for these audits by aiding in document collection, helping clarify compliance testing, etc... With the right support, handling the audit process can become a much easier process.
Why are 401(k) Audits Necessary for Springfield, MA Companies?
You must undergo a 401(k) audit for multiple purposes, to ensure retirement plans remain compliant with federal regulations and safeguard both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan adheres to 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) to guarantee 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 to avoid penalties.
- Filing Form 5500: The audit ensures proper and timely submission of Form 5500, an annual report summarizing the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions remain within 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 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 ensures that Springfield, MA employers are working to benefit plan participants, fulfilling their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is one of the most important parts of the audit.
Types of 401(k) Audits
There are two primary types of 401(k) Audits that Springfield, MA employers might come across, 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 most detailed audit necessary for most larger 401(k) plans. In a full-scope audit, the third-party auditor reviews all aspects of the plan, including financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor reviews 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 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 does not need 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 better alternative for some Springfield, MA businesses, if they satisfy the criteria.
The type of audit you need is based on your plan’s particular characteristics, such as the nature of its investments. At Correct Capital, we are able to assist you figure out which type of audit your plan needs and help you be well-prepared for both audit types.
401(k) Audit Pain Points for Springfield, MA Employers
While 401(k) audits are required to meet legal obligations, they frequently pose difficulties for Springfield, MA employers, especially those managing larger plans. Below are several common challenges that employers encounter:
- Document Collection and Management: Collecting the right documents, such as account statements, tax returns, and employee data, can be a lengthy process. Employers often struggle to sort through and deliver the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with shifting DOL, IRS, and ERISA regulations is difficult. Compliance oversights can lead to audit failures, sanctions, and expensive fixes 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 takes HR professionals, business owners, administrators, and others out of their core responsibilities, adding strain and shifting focus from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 properly and punctually, which is a key component of 401(k) compliance. Failing to meet the submission date may lead to penalties and cause additional problems for the company.
At Correct Capital, we understand these challenges and offer customized assistance to make the audit process in Springfield, MA more efficient. Whether it’s helping 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 Springfield, MA employers hoping to ease the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can provide solutions. These plans permit various businesses to consolidate into one 401(k) plan, frequently removing employer-specific audits.
- Multiple Employer Plans (MEP): These plans combine several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup enables Springfield, MA businesses to distribute 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 administered by a pooled plan provider (PPP). This structure makes meeting regulations easier and lowers expenses, making it attractive for Springfield, MA businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, all while maintaining adherence to regulations. Transitioning into an MEP or PEP may be highly beneficial for smaller firms in Springfield, MA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Springfield, MA 401(k) Audit Team
401(k) audits can be daunting, but choosing the right support can greatly improve the process. Working with a team that understands both the technical and practical aspects of the audit process helps you avoid unnecessary delays and anxiety. Here’s why having the right experts on your side is important:
- Experience and Expertise: A highly experienced group understands the nuances of 401(k) audits, encompassing full-scope and limited-scope audits. We will assist you with the documentation process and help identify areas of improvement within your plan.
- Compliance Assurance: The right team will help you stay on top of 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 help you prepare for your specific audit requirements. Correct Capital is responsible for managing 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: Getting ready for a 401(k) audit can consume a lot of time from day-to-day operations. The ideal support will shoulder a lot of the admin work, allowing 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 in a Multiple Employer Plan (MEP) or Pooled Employer Plan (PEP), while an audit specific to your plan is no longer mandated, 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
Working with a knowledgeable, reliable team is key to ensuring your 401(k) audit in Springfield, MA runs efficiently and stress-free. With Correct Capital supporting you, you’ll be assured that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in Springfield, MA
Complying with 401(k) audits is both a mandatory process and an opportunity to ensure your Springfield, MA company's retirement plan stays advantageous to your employees. Correct Capital’s knowledge of helping Springfield, MA businesses navigate the 401(k) audit reduces the strain, letting you prioritize your business while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to arrange a session and we'll guide you get ready for a streamlined, effective audit. Our team of experts will assist with everything from document collection through to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Springfield, MA advisor team, contact us online, or call us at 877-930-401(k) to get started.
