401(k) Audit Services in Tempe, AZ. For Tempe, AZ businesses that offer retirement plans, completing a 401(k) audit can seem like a challenging process. Between regulation from the Department of Labor (DOL) and IRS, collecting extensive documentation, and ensuring that your plan doesn't disproportionately benefit higher-paid employees, there is a lot to keep track of. However, with the right support, the 401(k) audit does not need to disrupt your business and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can be a major source of stress and are mandatory. 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 navigating your first audit in Tempe, AZ, or seeking to simplify a previously inefficient process, we're here to ensure it’s as smooth and easy as possible. You can book 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.
What is a 401(k) Audit?
A 401(k) audit is an yearly review required for Tempe, AZ companies with more than 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively participating in the plan, you are still required to have an audit if there are 100 who have the option to participate if they wanted. The audit ensures that the retirement plan follows the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s overall financial health, ensuring that employee contributions, withdrawals, and plan activities are accurately represented.
While required for regulatory purposes, 401(k) audits can be complicated and lengthy. Correct Capital supports Tempe, AZ businesses prepare for these audits by aiding in document collection, assisting with understanding compliance testing, as well as other audit processes. With an experienced team by your side, handling the audit process can become a much easier process.
Why are 401(k) Audits Necessary for Tempe, AZ Companies?
You are required to 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 necessary:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan complies with all legal requirements set 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 disproportionately benefits higher-paid employees (often known as “top-heavy” testing) to ensure the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in employee 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 confirms proper and timely submission of Form 5500, a yearly filing 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 do not exceed IRS contribution limits, preventing excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may review plan fees to ensure they are reasonable and not overly expensive for participants. Excessive fees may prompt compliance concerns and hurt how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Tempe, AZ employers are serving the interests of plan participants, meeting their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Confirming that the plan's documents, policies, and operational practices are in compliance 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 Tempe, AZ 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 thorough audit mandated for most larger 401(k) plans. In a full-scope audit, the external auditor reviews all aspects of the plan, which includes 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 verify that everything is accurate and in compliance.
- 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 be eligible for a limited-scope audit. In this type, the auditor is not required to audit the investment information certified by the financial institution, which can greatly lessen the audit’s complexity and cost. This may make it a better alternative for some Tempe, AZ businesses, if they satisfy the criteria.
The kind of audit your plan needs is based on your plan’s unique features, such as the nature of its investments. At Correct Capital, we will guide you to understand which type of audit your plan needs and help you be well-prepared for both audit types.
401(k) Audit Pain Points for Tempe, AZ Employers
While 401(k) audits are required to meet legal obligations, they can create major obstacles for Tempe, AZ employers, particularly those managing larger plans. Here are some of the key pain points that businesses face:
- Document Collection and Management: Gathering the necessary paperwork, such as account statements, tax returns, and employee data, can be labor-intensive. 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 oversights can cause audit failures, fines, and costly corrections later on.
- Discrimination Testing: Making sure that the plan isn’t top-heavy demands thorough checks for compliance and can necessitate additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit draws HR professionals, business owners, administrators, and others away from their core responsibilities, heightening pressure and distracting them from regular business activities.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 correctly and before the deadline, 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 make the audit process in Tempe, AZ smoother. From assisting with document collection or verifying adherence to regulations, our team helps take the burden off your shoulders.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For Tempe, AZ employers looking to lower the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can offer relief. These plans permit various businesses to join a single 401(k) plan, reducing the need for employer-specific audits.
- Multiple Employer Plans (MEP): These plans consolidate several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup permits Tempe, AZ businesses to divide the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs permit unrelated employers to enter a unified 401(k) plan administered by a pooled plan provider (PPP). This structure simplifies compliance and lowers expenses, making it attractive for Tempe, AZ 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 particularly attractive for small companies in Tempe, AZ, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Tempe, AZ 401(k) Audit Team
401(k) audits can appear challenging, 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 team of experts understands 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 ensures you keep up with evolving regulations, confirming your plan adheres to all regulations.
- 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 assist you in getting ready for your specific audit requirements. Correct Capital handles more than 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 right partner will take on much of the administrative burden, giving your HR and finance teams the freedom to concentrate on other tasks. Correct Capital helps streamline the process, taking the stress off your internal team.
- MEPs and PEPs Expertise: For businesses participating in an MEP or PEP, while an separate audit is no longer necessary, you're still required to comply with all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Collaborating with a knowledgeable, reliable team is essential to making sure your 401(k) audit in Tempe, AZ is as painless as possible. With Correct Capital by your side, you’ll feel secure that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Tempe, AZ
Adhering to 401(k) audit regulations is both a mandatory process and an opportunity to ensure your Tempe, AZ company's retirement plan stays advantageous to your employees. Correct Capital’s expertise in guiding Tempe, AZ businesses complete the 401(k) audit helps ease the burden, 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 allow us to assist you ensure your audit goes smoothly and efficiently. Our team of experts will support you with everything, including document collection to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Tempe, AZ advisor team, contact us online, or call us at 877-930-401(k) to get started.
