401(k) Audit Services in Honolulu, HI. For Honolulu, HI businesses that offer retirement plans, completing a 401(k) audit can seem like a challenging process. Between compliance requirements 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 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 be a major source of stress and are mandatory. Our team will partner with you with every aspect of document collection through making sure Form 5500 is filed correctly and on time. Whether you're navigating your first audit in Honolulu, HI, or seeking to simplify a previously inefficient process, we're here to minimize the hassle. 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.
Schedule a Meeting With an Advisor Today
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.
Schedule a 15-Minute Introductory Call
What is a 401(k) Audit?
A 401(k) audit is an yearly review necessary for Honolulu, HI companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you don’t have more than 100 employees actively participating in the plan, you must still undergo an audit if there are 100 who have the option to participate if they wanted. The audit verifies that the retirement plan adheres to the regulations set by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s financial integrity, ensuring that employee contributions, withdrawals, and plan activities are faithfully recorded.
While required for regulatory purposes, 401(k) audits can be challenging and demanding. Correct Capital assists Honolulu, HI businesses prepare for these audits by assisting with document collection, ensuring comprehension of compliance testing, as well as other audit processes. With an experienced team in your corner, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Honolulu, HI Companies?
You must undergo a 401(k) audit for a variety of reasons, to ensure retirement plans remain compliant with federal regulations and protect both the employer and employees. Here’s why you need them:
- Compliance with DOL and IRS Regulations: A 401(k) audit guarantees 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 verifies whether the plan disproportionately benefits 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 contributions, withdrawals, or other facets of plan oversight, providing an opportunity to fix these issues so they don't lead to fines.
- Filing Form 5500: The audit guarantees the accurate and on-time filing of Form 5500, an annual report that outlines 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, preventing excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may examine plan fees to confirm 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 ensures that Honolulu, HI employers are serving the interests of plan participants, meeting their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is a critical part of the audit.
Types of 401(k) Audits
There are two kinds of 401(k) audits that Honolulu, HI employers may encounter, based on the specific details 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 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 examines supporting documentation for contributions, withdrawls, and other transactions to ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Previously referred to as a "Limited Scope Audit," these pertain 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 certified by the financial institution, which can significantly reduce the audit’s complexity and cost. This may make it a preferable choice for some Honolulu, HI businesses, provided they meet the criteria.
The specific audit required is determined by your plan’s particular characteristics, such as the nature of its investments. At Correct Capital, we can help you determine which type of audit your plan needs and make sure you're ready for either process.
401(k) Audit Pain Points for Honolulu, HI Employers
While 401(k) audits are necessary for compliance, they can create major obstacles for Honolulu, HI employers, especially those overseeing more substantial retirement plans. Below are several common challenges that employers encounter:
- Document Collection and Management: Collecting the required files, such as account statements, tax returns, and employee data, can be labor-intensive. Employers often struggle to arrange and submit the necessary paperwork, particularly with 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 result in audit failures, sanctions, and expensive fixes later on.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy requires careful compliance checks and can lead to additional documentation and reporting.
- Time and Resource Demands: Audit preparation takes HR professionals, business owners, administrators, and others off of their core responsibilities, heightening pressure and diverting attention 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 a key component of 401(k) compliance. Failing to meet the submission date may lead to penalties and cause additional problems for the company.
At Correct Capital, we are aware of the difficulties involved and provide tailored support to streamline the audit procedure in Honolulu, HI. Whether it’s helping with document collection or confirming conformity 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 Honolulu, HI employers seeking to reduce the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can offer relief. These plans allow unrelated employers to consolidate into one 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans consolidate several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup allows Honolulu, HI businesses to divide the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs enable unrelated employers to participate in a collective 401(k) plan managed by a pooled plan provider (PPP). This structure makes meeting regulations easier and lowers expenses, making it appealing for Honolulu, HI businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while still ensuring compliance with federal regulations. Moving to one of these plans may be especially appealing to smaller businesses in Honolulu, HI, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Honolulu, HI 401(k) Audit Team
401(k) audits can be daunting, but selecting the proper assistance 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 partnering with the right experts matters:
- Experience and Expertise: A skilled team is knowledgeable about the details of 401(k) audits, encompassing full-scope and limited-scope audits. We help you navigate the documentation process and highlight areas for enhancement within your plan.
- Compliance Assurance: The right team helps you remain up to date 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 grasp 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, 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: Audit preparation can distract you significantly from day-to-day operations. The proper team will take on much of the administrative burden, allowing your HR and finance teams the freedom to concentrate on other tasks. Correct Capital makes the process smoother, reducing the pressure on 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, though with a reduced administrative workload after plan year end.
*as of March 2024
Working with a knowledgeable, reliable team is key to ensuring your 401(k) audit in Honolulu, HI runs efficiently and stress-free. With Correct Capital by your side, 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 Honolulu, HI
Complying with 401(k) audits is both a regulatory obligation and an opportunity to ensure your Honolulu, HI company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s expertise in guiding Honolulu, HI businesses through the 401(k) audit lightens the load, allowing you to focus on your business while avoiding fines for non-compliance.
Contact Correct Capital today to schedule a consultation and we'll guide you prepare for a smooth, efficient audit. Our team of experts will assist with everything from document collection through to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Honolulu, HI advisor team, contact us online, or call us at 877-930-401(k) to start the process.
