401(k) Audit Services in Durham, NC. For Durham, NC businesses offering their employees retirement plans, navigating a 401(k) audit can seem like a challenging process. Between compliance requirements from the Department of Labor (DOL) and IRS, organizing necessary documents, 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 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 even though they 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 preparing for your first audit in Durham, NC, or looking to streamline 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.
About 401(k) Audits
A 401(k) audit is an yearly review necessary for Durham, NC companies who have more than 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 must still undergo an audit if there are 100 who are eligible. 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 evaluates the plan’s financial integrity, ensuring that contributions, withdrawals, and operations are accurately represented.
While required for regulatory purposes, 401(k) audits can be complex and demanding. Correct Capital supports Durham, NC businesses get ready for these audits by aiding in document collection, helping clarify compliance testing, as well as other audit processes. With an experienced team in your corner, handling the audit process can become a much easier process.
Why are 401(k) Audits Necessary for Durham, NC Companies?
You must undergo a 401(k) audit for multiple purposes, to ensure retirement plans adhere to federal regulations and safeguard both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm that your 401(k) plan follows all legal requirements mandated 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 disproportionately benefits higher-paid employees (often called “top-heavy” testing) to ensure fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in contributions, distributions, or other facets of plan oversight, allowing you to correct these issues so they don't lead to penalties.
- Filing Form 5500: The audit guarantees 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 ensures that employer and employee contributions stay within IRS contribution limits, reducing the risk of excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may examine plan fees to confirm they are reasonable and don’t pose an excessive cost for participants. High fees can raise compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit verifies that Durham, NC employers are serving the interests of plan participants, meeting their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is one of the most important parts of the audit.
Types of 401(k) Audits
There are two primary types of 401(k) Audits that Durham, NC employers could face, 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 most detailed audit mandated for most larger 401(k) plans. In a full-scope audit, the external auditor reviews all aspects 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, withdrawls, and other transactions to confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Formerly known 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 qualify for a limited-scope audit. In this type, the auditor does not need 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 more attractive option for some Durham, NC businesses, provided they meet the criteria.
The type of audit you need depends on your plan’s particular characteristics, such as the nature of its investments. At Correct Capital, we will guide you to figure out which type of audit your plan needs and ensure you're fully prepared for either process.
401(k) Audit Pain Points for Durham, NC Employers
While 401(k) audits are required to meet legal obligations, they frequently pose difficulties for Durham, NC employers, notably those overseeing more substantial retirement plans. These are some of the major issues that companies deal with:
- Document Collection and Management: Gathering the right documents, such as account statements, tax returns, and employee data, can be time-consuming. Employers often struggle to sort through and submit the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with shifting DOL, IRS, and ERISA regulations can be challenging. Compliance errors can lead to audit failures, sanctions, and costly corrections in the long run.
- Discrimination Testing: Verifying that the plan isn’t top-heavy requires careful compliance checks and can necessitate additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit takes 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 have difficulty with file Form 5500 accurately and on time, which is a key component of 401(k) compliance. Late submissions can result in penalties and complicate things for the company.
At Correct Capital, we understand these challenges and offer customized assistance to make the audit process in Durham, NC smoother. From assisting 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 Durham, NC employers looking to lower the complexity of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can offer relief. These plans permit various businesses to consolidate into one 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 enables Durham, NC businesses to distribute the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs enable unrelated employers to enter a unified 401(k) plan managed by a pooled plan provider (PPP). This structure makes meeting regulations easier and reduces costs, making it attractive for Durham, NC businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, while ensuring regulatory compliance. Transitioning into an MEP or PEP may be especially appealing to smaller businesses in Durham, NC, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Durham, NC 401(k) Audit Team
401(k) audits can seem difficult, but selecting the proper assistance 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 skilled team is knowledgeable about the nuances of 401(k) audits, encompassing full-scope and limited-scope audits. We will assist you with 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, 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 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, 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: Preparing for a 401(k) audit can distract you significantly from day-to-day operations. The proper team will take on much of the administrative burden, enabling your HR and finance teams the ability to address other important matters. 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 not required, you're still required to comply with all the rules and regulations, but with fewer administrative responsibilities after plan year end.
*as of March 2024
Working with a knowledgeable, reliable team is key to ensuring your 401(k) audit in Durham, NC is as painless as possible. With Correct Capital as your partner, you’ll feel secure that your audit will be completed efficiently and accurately.
Call Correct Capital for Help With Your 401(k) Audit in Durham, NC
Complying with 401(k) audits is both a mandatory process and an important way to confirm your Durham, NC company's retirement plan stays advantageous to your employees. Correct Capital’s experience in assisting Durham, NC businesses navigate the 401(k) audit helps ease the burden, allowing you to focus on your business while preventing penalties for non-compliance.
Contact Correct Capital today to book a meeting and let us help you get ready for a streamlined, effective audit. 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 Durham, NC advisor team, contact us online, or call us at 877-930-401(k) to begin.
