401(k) Audit Services in Lubbock, TX. For Lubbock, TX businesses offering their employees retirement plans, completing a 401(k) audit can seem like a daunting task. Between regulation from the Department of Labor (DOL) and IRS, gathering a large amount of paperwork, 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 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 to meeting Form 5500 deadlines. Whether you're preparing for your first audit in Lubbock, TX, or looking to streamline a previously inefficient 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 mandated for Lubbock, TX companies with 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 follows the regulations set 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, withdrawals, and operations are accurately represented.
While required for regulatory purposes, 401(k) audits can be complex and time-consuming. Correct Capital assists Lubbock, TX businesses navigate these audits by helping with document collection, helping clarify compliance testing, as well as other audit processes. With the right support, handling the audit process can become a far more manageable task.
Why are 401(k) Audits Necessary for Lubbock, TX Companies?
You are required to undergo a 401(k) audit for multiple purposes, ensuring that retirement plans stay in line with federal regulations and safeguard both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: A 401(k) audit guarantees that your 401(k) plan complies with 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 isn't overly advantageous to 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, distributions, or additional plan operations, providing an opportunity to fix these issues to avoid penalties.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, an annual report detailing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit verifies that employer and employee contributions remain within IRS contribution limits, helping to avoid excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to confirm they are reasonable and not overly expensive for participants. Excessive fees may prompt compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Lubbock, TX employers are acting in the best interest of plan participants, fulfilling their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is a vital part of the audit.
Types of 401(k) Audits
There are two kinds of 401(k) audits that Lubbock, TX 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 necessary for most larger 401(k) plans. In a full-scope audit, the third-party auditor evaluates all components of the plan, such as financial statements, compliance with 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: Formerly known as a "Limited Scope Audit," these are for 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 required to audit the investment information verified by the financial institution, which can greatly lessen the audit’s complexity and cost. This can make it a better alternative for some Lubbock, TX businesses, if they satisfy the criteria.
The specific audit required is based on your plan’s particular characteristics, like the nature of its investments. At Correct Capital, we are able to assist you understand which type of audit your plan needs and help you be well-prepared for both audit types.
401(k) Audit Pain Points for Lubbock, TX Employers
While 401(k) audits are required to meet legal obligations, they can create major obstacles for Lubbock, TX employers, especially those overseeing more substantial retirement plans. Here are some of the key pain points that employers encounter:
- Document Collection and Management: Assembling the right documents, such as account statements, tax returns, and employee data, can be a lengthy process. Employers often struggle to organize and file 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 prove difficult. Compliance missteps can result in audit failures, penalties, and pricey amendments down the line.
- 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: Getting ready for an audit draws HR professionals, business owners, administrators, and others away from their core responsibilities, heightening pressure and shifting focus from regular business activities.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 accurately and on time, which is a key component of 401(k) compliance. Missing the deadline may lead to penalties and create further issues for the company.
At Correct Capital, we recognize these obstacles and provide tailored support to streamline the audit procedure in Lubbock, TX. Be it 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 Lubbock, TX employers looking to lower the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can provide solutions. These plans enable different employers to join a single 401(k) plan, reducing the need for employer-specific audits.
- Multiple Employer Plans (MEP): These plans pool together several unrelated employers into one 401(k) plan, reducing the cost and complexity of managing and auditing individual plans. This setup permits Lubbock, TX businesses to distribute the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs enable unrelated employers to enter a unified 401(k) plan overseen by a pooled plan provider (PPP). This structure makes meeting regulations easier and lowers expenses, making it appealing for Lubbock, TX 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 particularly attractive for small companies in Lubbock, TX, who wish to provide a 401(k) plan but are overwhelmed by costs and admin tasks.
Working with the Right Lubbock, TX 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place can greatly improve the process. 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 working with the right specialists is crucial:
- Experience and Expertise: A skilled team is knowledgeable about the complexities of 401(k) audits, including both 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 will help you stay on top of evolving regulations, ensuring that your plan meets all necessary standards.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will collaborate with you to identify 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, with more than $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: Getting ready for a 401(k) audit can take considerable time away from day-to-day operations. The ideal support will handle most of the administrative tasks, enabling your HR and finance teams the freedom to concentrate on other tasks. Correct Capital helps streamline the process, reducing the pressure on your internal team.
- MEPs and PEPs Expertise: For businesses enrolled in an MEP or PEP, while an individual plan audit is not required, 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
Collaborating with a well-informed, reliable team is key to ensuring your 401(k) audit in Lubbock, TX runs efficiently and stress-free. With Correct Capital supporting you, you’ll have the confidence that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Lubbock, TX
Adhering to 401(k) audit regulations is both a regulatory obligation and an opportunity to ensure your Lubbock, TX company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s expertise in guiding Lubbock, TX businesses navigate the 401(k) audit reduces the strain, allowing you to focus on your business while preventing penalties for non-compliance.
Contact Correct Capital today to book a meeting and allow us to assist you get ready for a streamlined, effective audit. Our team of experts will help with all aspects from document collection to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Lubbock, TX advisor team, contact us online, or call us at 877-930-401(k) to begin.
