401(k) Audit Services in Washington, DC. For Washington, DC businesses offering their employees retirement plans, navigating a 401(k) audit can seem like an uphill battle. 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 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 cause considerable frustration even though they cannot be avoided. Our team will assist you for everything from document collection to meeting Form 5500 deadlines. Whether you're preparing for your first audit in Washington, DC, or looking to streamline a process that's usually a burden, we're here to minimize the hassle. You can schedule 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 mandated for Washington, DC companies with at least 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 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 reviews the plan’s financial integrity, ensuring that employee contributions, distributions, and operations are accurately represented.
While necessary to meet legal requirements, 401(k) audits can be complicated and time-consuming. Correct Capital assists Washington, DC businesses navigate these audits by helping with document collection, ensuring comprehension of compliance testing, etc... With the right support, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Washington, DC Companies?
You are required to undergo a 401(k) audit for multiple purposes, to ensure retirement plans stay in line with federal regulations and protect both the employer and employees. Here’s why you need them:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm 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 ensures that the plan does not unfairly favor higher-paid employees (often referred to as “top-heavy” testing) to ensure fairness across all participants.
- Identifying Operational Issues: Audits can uncover errors in contributions, withdrawals, or other facets of plan oversight, providing an opportunity to fix these issues to avoid penalties.
- Filing Form 5500: The audit guarantees proper and timely submission of Form 5500, an annual report summarizing the plan’s financial status, which is required to maintain compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions remain within IRS limits for the year, preventing excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to verify they are reasonable and not overly expensive for participants. Overpriced fees could lead to compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Washington, DC employers are working to benefit plan participants, satisfying their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is a key part of the audit.
Types of 401(k) Audits
There are two primary types of 401(k) Audits that Washington, DC 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 mandated for most larger 401(k) plans. In a full-scope audit, the third-party auditor examines every part of the plan, such as financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines supporting documentation for contributions, distributions, and other transactions to confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Previously referred to as 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 qualify 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 could make it a better alternative for some Washington, DC businesses, if they satisfy the criteria.
The specific audit required is based on your plan’s particular characteristics, including the nature of its investments. At Correct Capital, we can help you determine which type of audit your plan is subject to and make sure you're ready for either process.
401(k) Audit Pain Points for Washington, DC Employers
While 401(k) audits are necessary for compliance, they frequently pose difficulties for Washington, DC employers, particularly those managing larger plans. These are some of the major issues that employers encounter:
- Document Collection and Management: Assembling the required files, such as account statements, tax returns, and employee data, can be time-consuming. Employers may find it challenging to arrange and file the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with evolving DOL, IRS, and ERISA regulations is difficult. Compliance errors can result in audit failures, penalties, and expensive fixes down the line.
- Discrimination Testing: Making sure that the plan isn’t top-heavy requires careful compliance checks and can result in additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit takes HR professionals, business owners, administrators, and others off of their core responsibilities, increasing stress and shifting focus from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 properly and punctually, which plays a critical role in 401(k) compliance. Late submissions may lead to penalties and cause additional problems for the company.
At Correct Capital, we recognize these obstacles and offer customized assistance to make the audit process in Washington, DC less stressful. Whether it’s helping 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 Washington, DC employers looking to lower the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can offer relief. These plans enable different 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, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup permits Washington, DC businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs enable unrelated employers to join a shared 401(k) plan managed by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it appealing for Washington, DC businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while ensuring regulatory compliance. Transitioning into an MEP or PEP may be particularly attractive for small companies in Washington, DC, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Washington, DC 401(k) Audit Team
401(k) audits can seem difficult, but having the right team in place changes everything. Partnering with professionals that is well-versed in both the technicalities and practicalities of the audit process reduces the time and pressure you face. Here’s why having the right experts on your side is important:
- Experience and Expertise: A highly experienced group is knowledgeable about the nuances of 401(k) audits, covering both full-scope and limited-scope audits. We help you navigate 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 assist you in getting ready 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, enabling us to understand the specifics of any company 401(k) plan.
- Saving Time and Resources: Audit preparation can consume a lot of time from day-to-day operations. The proper team will take on much of the administrative burden, giving 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 enrolled in an MEP or PEP, while an audit specific to your plan is no longer mandated, 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 experienced, reliable team is crucial for guaranteeing your 401(k) audit in Washington, DC is as painless as possible. With Correct Capital supporting you, 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 Washington, DC
Adhering to 401(k) audit regulations is both a legal requirement and an opportunity to ensure your Washington, DC company's retirement plan stays advantageous to your employees. Correct Capital’s expertise in guiding Washington, DC businesses complete the 401(k) audit lightens the load, enabling you to concentrate on your operations while preventing penalties for non-compliance.
Contact Correct Capital today to book a meeting and we'll guide you ensure your audit goes smoothly and efficiently. Our team of experts will help with all aspects from document collection through to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Washington, DC advisor team, contact us online, or call us at 877-930-401(k) to begin.
