401(k) Audit Services in Fremont, CA. For Fremont, CA businesses offering their employees retirement plans, navigating a 401(k) audit can feel like a daunting task. 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, it can be overwhelming. However, with the right support, the 401(k) audit does not need to disrupt your business and interfere with your company’s daily operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches and cannot be avoided. Our team will work with you for everything from document collection to meeting Form 5500 deadlines. Whether you're preparing for your first audit in Fremont, CA, or seeking to simplify a process that's usually a burden, we're here to minimize the hassle. You can ask for a meeting with a member of our advisor team, contact us online, or call us at 877-930-401(k) to get started.
What is a 401(k) Audit?
A 401(k) audit is an yearly review mandated for Fremont, CA 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 contributing to the plan, you still need an audit if there are 100 who are eligible. The audit confirms that the retirement plan follows the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It assesses the plan’s financial integrity, ensuring that employee contributions, withdrawals, and operations are properly documented.
While necessary for compliance, 401(k) audits can be complicated and time-consuming. Correct Capital helps Fremont, CA businesses get ready for these audits by aiding in document collection, helping clarify compliance testing, etc... With an experienced team in your corner, handling the audit process can become a much easier process.
Why are 401(k) Audits Necessary for Fremont, CA Companies?
You are required to undergo a 401(k) audit for a variety of reasons, 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: Audits ensure that your 401(k) plan adheres to all legal requirements set by the Department of Labor (DOL) and the IRS, particularly under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit checks if the plan does not unfairly favor higher-paid employees (often known as “top-heavy” testing) in order to promote fairness across all participants.
- Identifying Operational Issues: Audits often expose errors in contributions, distributions, or other facets of plan oversight, allowing you to correct these issues to avoid penalties.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, an annual report summarizing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions remain within IRS contribution limits, preventing excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to ensure 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 verifies that Fremont, CA employers are serving the interests of plan participants, fulfilling their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Confirming that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is a critical part of the audit.
Types of 401(k) Audits
There are two main categories of 401(k) audits that Fremont, CA employers may encounter, depending on factors such as the size and nature 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 independent auditor reviews all aspects of the plan, including financial statements, conformance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor examines supporting documentation for contributions, distributions, 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 managed 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 endorsed by the financial institution, which can substantially lower the audit’s complexity and cost. This may make it a preferable choice for some Fremont, CA businesses, as long as they meet the criteria.
The type of audit you need is based on your plan’s unique features, like the nature of its investments. At Correct Capital, we will guide you to determine which type of audit your plan needs and ensure you're fully prepared for either process.
401(k) Audit Pain Points for Fremont, CA Employers
While 401(k) audits must be conducted to ensure compliance, they frequently pose difficulties for Fremont, CA 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 necessary paperwork, such as account statements, tax returns, and employee data, can be time-consuming. Employers may find it challenging to organize and deliver the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with shifting DOL, IRS, and ERISA regulations can prove difficult. Compliance errors can cause audit failures, sanctions, and expensive fixes in the long run.
- Discrimination Testing: Verifying that the plan doesn't favor higher earning employees demands thorough checks for compliance and can lead to additional documentation and reporting.
- Time and Resource Demands: Audit preparation draws HR professionals, business owners, administrators, and others off of their core responsibilities, increasing stress and distracting them from regular business activities.
- 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 may lead to penalties and create further issues for the company.
At Correct Capital, we are aware of the difficulties involved and provide tailored support to make the audit process in Fremont, CA more efficient. Whether it’s helping 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 Fremont, CA employers hoping to ease the workload of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can provide solutions. These plans allow unrelated employers 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, reducing the cost and complexity of managing and auditing individual plans. This setup enables Fremont, CA businesses to distribute the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Recently established, PEPs permit unrelated employers to participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it attractive for Fremont, CA businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while ensuring regulatory compliance. Moving to one of these plans may be highly beneficial for smaller firms in Fremont, CA, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Fremont, CA 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place changes everything. Working with a team that understands both the technical and practical aspects of the audit process helps you avoid unnecessary delays and anxiety. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A highly experienced group will be familiar with the nuances of 401(k) audits, including both full-scope and limited-scope audits. We help you navigate the documentation process and pinpoint potential improvements within your plan.
- Compliance Assurance: The right team helps you remain up to date with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: All 401(k) plans are distinct. An experienced team will collaborate with you to grasp the unique needs of your plan and assist you in getting ready 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, which allows us to understand the nuances of any company 401(k) plan.
- Saving Time and Resources: Getting ready for a 401(k) audit can distract you significantly from day-to-day operations. The ideal support will shoulder a lot of the admin work, giving your HR and finance teams the ability to address other important matters. Correct Capital helps streamline the process, reducing the pressure on your internal team.
- MEPs and PEPs Expertise: For businesses participating in an MEP or PEP, while an audit specific to your plan is no longer necessary, you're still responsible for following 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 crucial for guaranteeing your 401(k) audit in Fremont, CA goes as smoothly as possible. With Correct Capital as your partner, 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 Fremont, CA
Meeting 401(k) audit requirements is both a mandatory process and an opportunity to ensure your Fremont, CA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s knowledge of helping Fremont, CA businesses complete the 401(k) audit helps ease the burden, allowing you to focus on your business while avoiding fines for non-compliance.
Contact Correct Capital today to book a meeting and we'll guide you prepare for a smooth, efficient 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 Fremont, CA advisor team, contact us online, or call us at 877-930-401(k) to start the process.
