401(k) Audit Services in Indianapolis, IN. For Indianapolis, IN businesses offering their employees retirement plans, completing a 401(k) audit can feel like a challenging process. 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, there are many factors to consider. However, with the right support, the 401(k) audit can be made much easier and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can create significant headaches and are a regulatory requirement. Our team will assist you with every aspect of document collection to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Indianapolis, IN, or looking to streamline a previously cumbersome process, 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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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 Indianapolis, IN companies who have more than 100 eligible participants in their 401(k) plan. Note: Even if you lack more than 100 employees actively enrolled in the plan, you must still undergo an audit if there are 100 who are eligible. 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 reviews the plan’s overall financial health, ensuring that contributions, distributions, and plan activities are faithfully recorded.
While required for regulatory purposes, 401(k) audits can be complex and time-consuming. Correct Capital assists Indianapolis, IN businesses get ready for these audits by aiding in document collection, assisting with understanding compliance testing, and other related tasks. With the right support, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Indianapolis, IN Companies?
You need to undergo a 401(k) audit for a variety of reasons, to ensure retirement plans stay in line with federal regulations and protect both the employer and employees. Here’s why they are necessary:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm 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 checks if the plan disproportionately benefits higher-paid employees (often referred to as “top-heavy” testing) in order to promote the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in contributions, distributions, or additional plan operations, enabling you to resolve these issues before they result in fines.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a required document detailing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions stay within IRS limits for the year, helping to avoid excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may review plan fees to verify they are reasonable and don’t pose an excessive cost for participants. Excessive fees may prompt compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Indianapolis, IN employers are serving the interests of plan participants, satisfying their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are aligned with regulatory guidelines is a critical part of the audit.
Types of 401(k) Audits
There are two kinds of 401(k) audits that Indianapolis, IN employers could face, 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 most detailed audit required for most larger 401(k) plans. In a full-scope audit, the independent auditor examines every part 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, distributions, and other transactions to confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Previously called a "Limited Scope Audit," these are for plans with investments managed 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 certified by the financial institution, which can greatly lessen the audit’s complexity and cost. This can make it a better alternative for some Indianapolis, IN businesses, if they satisfy the criteria.
The type of audit you need is based on your plan’s specific details, such as the nature of its investments. At Correct Capital, we are able to assist you 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 Indianapolis, IN Employers
While 401(k) audits must be conducted to ensure compliance, they can create major obstacles for Indianapolis, IN employers, especially those offering bigger 401(k) plans. Below are several common challenges that companies deal with:
- Document Collection and Management: Assembling the required files, such as account statements, tax returns, and employee data, can be a lengthy process. Employers may find it challenging to organize and file 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 missteps can lead to audit failures, penalties, and expensive fixes down the line.
- Discrimination Testing: Making sure that the plan doesn't favor higher earning employees involves detailed compliance reviews and can necessitate additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit draws HR professionals, business owners, administrators, and others away from their core responsibilities, adding strain and diverting attention from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 correctly and before the deadline, which is a key component of 401(k) compliance. Failing to meet the submission date can result in penalties and complicate things for the company.
At Correct Capital, we are aware of the difficulties involved and provide tailored support to make the audit process in Indianapolis, IN less stressful. 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 Indianapolis, IN employers seeking to reduce the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can provide solutions. These plans permit various businesses to participate in a unified 401(k) plan, often eliminating 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 permits Indianapolis, IN businesses to share the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs permit unrelated employers to enter a unified 401(k) plan administered by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it a desirable option for Indianapolis, IN businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while ensuring regulatory compliance. Transitioning into an MEP or PEP may be especially appealing to smaller businesses in Indianapolis, IN, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Indianapolis, IN 401(k) Audit Team
401(k) audits can appear challenging, but choosing the right support can make all the difference. Working with a team that understands both the technical and practical aspects of the audit process reduces the time and pressure you face. 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, including both full-scope and limited-scope audits. We help you navigate the documentation process and help identify areas of improvement within your plan.
- Compliance Assurance: The right team helps you remain up to date with evolving regulations, ensuring that your plan meets all necessary standards.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will partner with you to understand the unique needs of your plan and help you prepare for your specific audit requirements. Correct Capital currently manages over 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: Preparing for a 401(k) audit can take considerable time away from day-to-day operations. The proper team will handle most of the administrative tasks, allowing your HR and finance teams to focus on other priorities. 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 audit specific to your plan is not required, you're still required to comply with all the rules and regulations, though with a reduced administrative workload after plan year end.
*as of March 2024
Working with a experienced, reliable team is crucial for guaranteeing your 401(k) audit in Indianapolis, IN runs efficiently and stress-free. With Correct Capital supporting you, you’ll have the confidence that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Indianapolis, IN
Adhering to 401(k) audit regulations is both a regulatory obligation and an opportunity to verify your Indianapolis, IN company's retirement plan stays advantageous to your employees. Correct Capital’s experience in assisting Indianapolis, IN businesses complete the 401(k) audit helps ease the burden, enabling you to concentrate on your operations while preventing penalties for non-compliance.
Contact Correct Capital today to arrange a session 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 Indianapolis, IN advisor team, contact us online, or call us at 877-930-401(k) to get started.
