401(k) Audit Services in Modesto, CA. For Modesto, CA businesses that offer retirement plans, completing a 401(k) audit can seem like an uphill battle. 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, 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 cause considerable frustration and are a regulatory requirement. Our team will work with you with every aspect of document collection through meeting Form 5500 deadlines. Whether you're preparing for your first audit in Modesto, CA, or hoping to optimize a previously inefficient process, we're here to make it as simple and stress-free as possible. You can book 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.
What is a 401(k) Audit?
A 401(k) audit is an annual review necessary for Modesto, CA companies with 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 are still required to have an audit if there are 100 who have the option to participate if they wanted. The audit ensures that the retirement plan complies with the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s overall financial health, ensuring that employee contributions, withdrawals, and plan activities are properly documented.
While necessary for compliance, 401(k) audits can be complicated and time-consuming. Correct Capital supports Modesto, CA businesses navigate these audits by aiding in document collection, assisting with understanding compliance testing, as well as other audit processes. With an experienced team by your side, navigating the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Modesto, CA Companies?
You are required to undergo a 401(k) audit for a variety of reasons, to ensure retirement plans remain compliant with 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 complies with 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 disproportionately benefits higher-paid employees (often known as “top-heavy” testing) to guarantee the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, withdrawals, or additional plan operations, allowing you to correct these issues to avoid fines.
- Filing Form 5500: The audit confirms the accurate and on-time filing of Form 5500, a required document detailing the plan’s financial status, which is required to maintain compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions stay within IRS contribution limits, helping to avoid excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to verify they are reasonable and aren’t unnecessarily high for participants. Overpriced fees could lead to compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit ensures that Modesto, CA employers are acting in the best interest of plan participants, satisfying their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are aligned 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 Modesto, CA employers might come across, depending on the size and complexity 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 mandated for most larger 401(k) plans. In a full-scope audit, the external auditor evaluates all components of the plan, which includes financial statements, adherence to Department of Labor (DOL) and IRS regulations, and participant data. The auditor reviews 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 apply to plans with investments held 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 can make it a preferable choice for some Modesto, CA businesses, as long as they meet the criteria.
The type of audit you need is determined by your plan’s unique features, such as the nature of its investments. At Correct Capital, we will guide you to determine which type of audit your plan is subject to and ensure you're fully prepared for whichever process is necessary.
401(k) Audit Pain Points for Modesto, CA Employers
While 401(k) audits are necessary for compliance, they can create major obstacles for Modesto, CA employers, particularly those running bigger 401(k) plans. These are some of the major issues that businesses face:
- Document Collection and Management: Assembling the required files, such as account statements, tax returns, and employee data, can be labor-intensive. Employers may find it challenging to arrange and file the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with changing DOL, IRS, and ERISA regulations is difficult. Compliance oversights can cause audit failures, sanctions, and expensive fixes down the line.
- Discrimination Testing: Verifying that the plan doesn't favor higher earning employees demands thorough checks for compliance and can necessitate 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 shifting focus from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 accurately and on time, which is essential to 401(k) compliance. Late submissions can result in penalties and create further issues for the company.
At Correct Capital, we understand these challenges and deliver personalized help to streamline the audit procedure in Modesto, CA. 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 Modesto, CA 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 join a single 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 Modesto, CA businesses to share the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, 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 Modesto, CA 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. Transitioning into an MEP or PEP may be highly beneficial for smaller firms in Modesto, CA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Modesto, CA 401(k) Audit Team
401(k) audits can appear challenging, but having the right team in place changes everything. Collaborating with experts 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 team of experts is knowledgeable about the complexities of 401(k) audits, covering both full-scope and limited-scope audits. We can guide you through the documentation process and pinpoint potential improvements within your plan.
- Compliance Assurance: The right team ensures you keep up with 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 understand 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, enabling us to understand the specifics of any company 401(k) plan.
- Saving Time and Resources: Audit preparation can consume a lot of time from day-to-day operations. The ideal support will shoulder a lot of the admin work, giving your HR and finance teams to focus on other priorities. Correct Capital makes the process smoother, 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 separate audit is not required, 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 experienced, reliable team is essential to making sure your 401(k) audit in Modesto, CA runs efficiently and stress-free. With Correct Capital supporting you, you’ll feel secure that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Modesto, CA
Meeting 401(k) audit requirements is both a mandatory process and an opportunity to ensure your Modesto, CA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s experience in assisting Modesto, CA businesses complete the 401(k) audit lightens the load, enabling you to concentrate on your operations while preventing penalties for non-compliance.
Contact Correct Capital today to book a meeting and allow us to assist you ensure your audit goes smoothly and efficiently. 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 Modesto, CA advisor team, contact us online, or call us at 877-930-401(k) to begin.
