401(k) Audit Services in Stockton, CA. For Stockton, CA businesses that offer retirement plans, completing a 401(k) audit can feel like a challenging process. Between compliance requirements from the Department of Labor (DOL) and IRS, collecting extensive documentation, and ensuring that your plan isn’t “top-heavy”, there is a lot to keep track of. 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 and are mandatory. Our team will partner with you with every aspect of document collection to meeting Form 5500 deadlines. Whether you're preparing for your first audit in Stockton, CA, or looking to streamline a previously inefficient process, we're here to ensure it’s as smooth and easy as possible. 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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What is a 401(k) Audit?
A 401(k) audit is an yearly review necessary for Stockton, CA companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you lack 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 verifies that the retirement plan complies with the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s overall financial health, ensuring that employee contributions, distributions, and plan activities are accurately represented.
While required for regulatory purposes, 401(k) audits can be complicated and demanding. Correct Capital assists Stockton, CA businesses get ready for these audits by aiding in document collection, helping clarify compliance testing, and other related tasks. With an experienced team in your corner, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Stockton, CA Companies?
You are required to undergo a 401(k) audit for several reasons, to ensure retirement plans remain compliant with federal regulations and protect both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan follows all legal requirements mandated by the Department of Labor (DOL) and the IRS, particularly 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 known as “top-heavy” testing) in order to promote fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, withdrawals, or other facets of plan oversight, enabling you to resolve these issues to avoid penalties.
- Filing Form 5500: The audit guarantees the accurate and on-time filing of Form 5500, a required document summarizing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions remain within IRS contribution limits, preventing excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to confirm they are reasonable and don’t pose an excessive cost for participants. High fees can raise compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit confirms that Stockton, CA employers are acting in the best interest of plan participants, fulfilling their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are aligned 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 Stockton, CA 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 necessary for most larger 401(k) plans. In a full-scope audit, the third-party 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, withdrawls, and other transactions to confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Previously called 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 take advantage of a limited-scope audit. In this type, the auditor is not obligated to audit the investment information endorsed by the financial institution, which can greatly lessen the audit’s complexity and cost. This can make it a preferable choice for some Stockton, CA businesses, as long as they meet the criteria.
The specific audit required depends on your plan’s unique features, including the nature of its investments. At Correct Capital, we are able to assist you understand which type of audit your plan needs and make sure you're ready for either process.
401(k) Audit Pain Points for Stockton, CA Employers
While 401(k) audits must be conducted to ensure compliance, they frequently pose difficulties for Stockton, CA employers, notably those overseeing more substantial retirement plans. Here are some of the key pain points that businesses face:
- Document Collection and Management: Assembling the necessary paperwork, such as account statements, tax returns, and employee data, can be a lengthy process. Employers may find it challenging to organize and deliver the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with changing DOL, IRS, and ERISA regulations can prove difficult. Compliance errors can cause audit failures, sanctions, and costly corrections in the long run.
- Discrimination Testing: Making sure that the plan doesn't favor higher earning employees involves detailed compliance reviews and can result in additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit draws HR professionals, business owners, administrators, and others out of their core responsibilities, increasing stress and shifting focus from regular business activities.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 properly and punctually, which is essential to 401(k) compliance. Failing to meet the submission date may lead to penalties and create further issues for the company.
At Correct Capital, we understand these challenges and deliver personalized help to make the audit process in Stockton, CA more efficient. From assisting 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 Stockton, 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 participate in a unified 401(k) plan, reducing the need for employer-specific audits.
- Multiple Employer Plans (MEP): These plans combine several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup permits Stockton, CA businesses to distribute the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs permit 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 a desirable option for Stockton, 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. Moving to one of these plans may be especially appealing to smaller businesses in Stockton, CA, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Stockton, CA 401(k) Audit Team
401(k) audits can seem difficult, but having the right team in place 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 having the right experts on your side is important:
- Experience and Expertise: A highly experienced group will be familiar with the nuances of 401(k) audits, encompassing full-scope and limited-scope audits. We will assist you with the documentation process and pinpoint potential improvements within your plan.
- Compliance Assurance: The right team will help you stay on top of evolving regulations, making sure your plan complies with all required guidelines.
- Tailored Support: Every 401(k) plan is different. An experienced team will partner with you to grasp 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, 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 take considerable time away from day-to-day operations. The right partner will shoulder a lot of the admin work, giving your HR and finance teams the ability to address other important matters. Correct Capital makes the process smoother, taking the stress off 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, though with a reduced administrative workload after plan year end.
*as of March 2024
Collaborating with a knowledgeable, reliable team is key to ensuring your 401(k) audit in Stockton, CA goes as smoothly as possible. With Correct Capital supporting you, you’ll be assured that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Stockton, CA
Meeting 401(k) audit requirements is both a mandatory process and an opportunity to ensure your Stockton, CA company's retirement plan stays advantageous to your employees. Correct Capital’s experience in assisting Stockton, CA businesses complete the 401(k) audit lightens the load, 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 get ready for a streamlined, effective audit. Our team of experts will help with all aspects from document collection through to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Stockton, CA advisor team, contact us online, or call us at 877-930-401(k) to begin.
