401(k) Audit Services in Detroit, MI. For Detroit, MI businesses offering their employees retirement plans, completing a 401(k) audit can seem like a challenging process. Between compliance requirements 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, it can be overwhelming. However, with the right support, the 401(k) audit does not need to disrupt your business and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches and are mandatory. Our team will work with you for everything from document collection to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Detroit, MI, or hoping to optimize a process that's usually a burden, we're here to make it as simple and stress-free as possible. 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 required for Detroit, MI companies who have more than 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively enrolled in the plan, you still need an audit if there are 100 who have the option to participate if they wanted. 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 evaluates the plan’s overall financial health, 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 supports Detroit, MI businesses get ready for these audits by aiding in document collection, assisting with understanding compliance testing, and other related tasks. With the right support, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Detroit, MI Companies?
You must 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 they are necessary:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan follows all legal requirements established 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 does not unfairly favor higher-paid employees (often called “top-heavy” testing) to guarantee fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, withdrawals, or other facets of plan oversight, allowing you to correct these issues to avoid penalties.
- Filing Form 5500: The audit guarantees proper and timely submission of Form 5500, a yearly filing detailing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions remain within IRS contribution limits, helping to avoid excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to ensure they are reasonable and not overly expensive for participants. Overpriced fees could lead to compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Detroit, MI employers are working to benefit 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 in compliance 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 Detroit, MI employers may encounter, depending on the size and complexity 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 more comprehensive audit necessary for most larger 401(k) plans. In a full-scope audit, the third-party auditor evaluates all components of the plan, including financial statements, adherence to Department of Labor (DOL) and IRS regulations, and participant data. The auditor evaluates supporting documentation for contributions, distributions, 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 pertain to plans with investments overseen 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 obligated to audit the investment information verified by the financial institution, which can significantly reduce the audit’s complexity and cost. This can make it a more attractive option for some Detroit, MI businesses, if they satisfy the criteria.
The type of audit you need depends on your plan’s particular characteristics, including the nature of its investments. At Correct Capital, we are able to assist you determine which type of audit your plan is subject to and make sure you're ready for both audit types.
401(k) Audit Pain Points for Detroit, MI Employers
While 401(k) audits are required to meet legal obligations, they frequently pose difficulties for Detroit, MI employers, notably those overseeing more substantial retirement plans. Below are several common challenges that businesses face:
- Document Collection and Management: Gathering the required files, such as account statements, tax returns, and employee data, can be a lengthy process. Employers frequently have difficulties to arrange 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 can be challenging. Compliance errors can cause audit failures, fines, and expensive fixes later on.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy involves detailed compliance reviews and can result in additional documentation and reporting.
- Time and Resource Demands: Audit preparation draws HR professionals, business owners, administrators, and others away from their core responsibilities, adding strain and shifting focus from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 accurately and on time, which plays a critical role in 401(k) compliance. Missing the deadline can result in penalties and cause additional problems for the company.
At Correct Capital, we are aware of the difficulties involved and provide tailored support to make the audit process in Detroit, MI less stressful. From assisting with document collection or ensuring compliance with regulations, our team helps take the burden off your shoulders.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For Detroit, MI employers hoping to ease the workload of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can offer relief. These plans enable different 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 allows Detroit, MI businesses to share the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs permit unrelated employers to participate in a collective 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it attractive for Detroit, MI businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, all while maintaining adherence to regulations. Moving to one of these plans may be especially appealing to smaller businesses in Detroit, MI, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Detroit, MI 401(k) Audit Team
401(k) audits can be daunting, but having the right team in place can greatly improve the process. Partnering with professionals that has a firm grasp of both technical and practical elements 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 skilled team understands the complexities of 401(k) audits, including both full-scope and limited-scope audits. We can guide you through the documentation process and help identify areas of improvement within your plan.
- Compliance Assurance: The right team ensures you keep up with evolving regulations, making sure your plan complies with all required guidelines.
- Tailored Support: All 401(k) plans are distinct. 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 is responsible for managing over 37 plans in both small and large companies, and represents over $212 million in total plan assets across the United States, giving us the expertise to handle 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 take on much of the administrative burden, enabling your HR and finance teams to focus on other priorities. Correct Capital helps streamline the process, 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 individual plan audit is no longer necessary, you're still obligated to adhere to all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Working with a experienced, reliable team is key to ensuring your 401(k) audit in Detroit, MI is as painless as possible. With Correct Capital supporting you, you’ll be assured that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Detroit, MI
Adhering to 401(k) audit regulations is both a regulatory obligation and an important way to confirm your Detroit, MI company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s expertise in guiding Detroit, MI businesses through the 401(k) audit helps ease the burden, letting you prioritize your business while avoiding fines 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 assist with everything from document collection to compliance checks, making sure your plan is set up for success. You can schedule a meeting with a member of our Detroit, MI advisor team, contact us online, or call us at 877-930-401(k) to start the process.
