401(k) Audit Services in Tacoma, WA. For Tacoma, WA businesses offering their employees retirement plans, completing a 401(k) audit can seem like a challenging process. Between regulation from the Department of Labor (DOL) and IRS, collecting extensive documentation, 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 can be made much easier and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can create significant headaches and are mandatory. Our team will partner with you for everything from document collection to making sure Form 5500 is filed correctly and on time. Whether you're navigating your first audit in Tacoma, WA, or looking to streamline 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.
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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 required for Tacoma, WA 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 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 evaluates the plan’s overall financial health, ensuring that employee contributions, withdrawals, and plan activities are faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be complicated and time-consuming. Correct Capital supports Tacoma, WA businesses get ready for these audits by helping with document collection, helping clarify compliance testing, etc... With the right support, getting through the audit can become a much easier process.
Why are 401(k) Audits Necessary for Tacoma, WA Companies?
You need to 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 they are necessary:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan follows all legal requirements established by the Department of Labor (DOL) and the IRS, particularly under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit ensures that the plan disproportionately benefits higher-paid employees (often known as “top-heavy” testing) to guarantee fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in contributions, distributions, or other facets of plan oversight, enabling you to resolve these issues so they don't lead to penalties.
- Filing Form 5500: The audit confirms the accurate and on-time filing of Form 5500, a yearly filing detailing the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit verifies that employer and employee contributions do not exceed IRS contribution limits, helping to avoid excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may review plan fees to verify they are reasonable and aren’t unnecessarily high for participants. Excessive fees may prompt compliance concerns and hurt the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit confirms that Tacoma, WA employers are working to benefit plan participants, satisfying their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is one of the most important parts of the audit.
Types of 401(k) Audits
There are two kinds of 401(k) audits that Tacoma, WA employers might come across, 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 required for most larger 401(k) plans. In a full-scope audit, the external auditor examines every part 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, distributions, and other transactions to ensure accuracy and compliance.
- Section 103(a)(3)(C)) Audit: Formerly known as a "Limited Scope Audit," these apply to plans with investments overseen 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 endorsed by the financial institution, which can substantially lower the audit’s complexity and cost. This could make it a more attractive option for some Tacoma, WA businesses, if they satisfy the criteria.
The kind of audit your plan needs is based on your plan’s unique features, like the nature of its investments. At Correct Capital, we will guide you to understand which type of audit your plan needs and ensure you're fully prepared for whichever process is necessary.
401(k) Audit Pain Points for Tacoma, WA Employers
While 401(k) audits are necessary for compliance, they often present significant challenges for Tacoma, WA employers, notably those managing larger 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 time-consuming. Employers often struggle to organize and submit the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with changing DOL, IRS, and ERISA regulations is difficult. Compliance oversights can cause audit failures, penalties, and costly corrections 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: Getting ready for an audit draws HR professionals, business owners, administrators, and others off of their core responsibilities, adding strain and distracting them from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 correctly and before the deadline, which is essential to 401(k) compliance. Late submissions could cause penalties and cause additional problems for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to streamline the audit procedure in Tacoma, WA. From assisting 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 Tacoma, WA employers looking to lower the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP) can offer relief. These plans enable different employers to participate in a unified 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 permits Tacoma, WA businesses to divide the administrative responsibilities and possibly eliminate the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs permit unrelated employers to participate in a collective 401(k) plan overseen by a pooled plan provider (PPP). This structure makes meeting regulations easier and cuts costs, making it appealing for Tacoma, WA businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, all while maintaining adherence to regulations. Switching to these types of plans may be especially appealing to smaller businesses in Tacoma, WA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Tacoma, WA 401(k) Audit Team
401(k) audits can be daunting, but having the right team in place can make all the difference. Partnering with professionals that understands both the technical and practical aspects of the audit process helps you avoid unnecessary delays and anxiety. Here’s why partnering with the right experts matters:
- Experience and Expertise: A highly experienced group is knowledgeable about the complexities of 401(k) audits, covering both 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 ensures you keep up with evolving regulations, confirming your plan adheres to all regulations.
- Tailored Support: Each 401(k) plan has unique requirements. 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, and represents over $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 distract you significantly from day-to-day operations. The ideal support 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 participating in an MEP or PEP, while an separate audit is no longer mandated, 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
Collaborating with a knowledgeable, reliable team is key to ensuring your 401(k) audit in Tacoma, WA is as painless as possible. With Correct Capital by your side, you’ll feel secure that your audit will be handled with precision and care.
Call Correct Capital for Help With Your 401(k) Audit in Tacoma, WA
Adhering to 401(k) audit regulations is both a legal requirement and an opportunity to verify your Tacoma, WA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s experience in assisting Tacoma, WA businesses complete the 401(k) audit lightens the load, enabling you to concentrate on your operations while ensuring you're not penalized for non-compliance.
Contact Correct Capital today to book a meeting and we'll guide you get ready for a streamlined, effective audit. Our team of experts will assist with everything from document collection through to compliance checks, making sure your plan is set up for success. You can schedule a meeting with a member of our Tacoma, WA advisor team, contact us online, or call us at 877-930-401(k) to start the process.
