401(k) Audit Services in Worcester, MA. For Worcester, MA businesses offering their employees retirement plans, navigating a 401(k) audit can feel like an uphill battle. 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”, it can be overwhelming. However, with the right support, the 401(k) audit can be made much easier and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can create significant headaches and cannot be avoided. 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 Worcester, MA, or hoping to optimize a process that's usually a burden, we're here to ensure it’s as smooth and easy as possible. 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 annual review necessary for Worcester, MA companies with at least 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively participating in the plan, you still need an audit if there are 100 who are eligible. The audit verifies that the retirement plan adheres to the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s overall financial health, ensuring that contributions, withdrawals, and operations are properly documented.
While necessary for compliance, 401(k) audits can be complicated and lengthy. Correct Capital helps Worcester, MA businesses prepare for these audits by assisting with document collection, assisting with understanding compliance testing, and other related tasks. With an experienced team by your side, navigating the audit can become a much easier process.
Why are 401(k) Audits Necessary for Worcester, MA Companies?
You need to undergo a 401(k) audit for a variety of reasons, ensuring that retirement plans remain compliant with federal regulations and protect 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 adheres to all legal requirements set by the Department of Labor (DOL) and the IRS, especially under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit ensures that the plan does not unfairly favor higher-paid employees (often referred to as “top-heavy” testing) to ensure the plan treats all employees fairly and equally.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, distributions, or additional plan operations, providing an opportunity to fix these issues so they don't lead to fines.
- Filing Form 5500: The audit ensures 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 confirms that employer and employee contributions stay within IRS contribution limits, preventing excess contributions that may result in penalties.
- Fee Reasonableness: Auditors may evaluate plan fees to ensure they are reasonable and not overly expensive for participants. Overpriced fees could lead to compliance concerns and affect how employees' investments and savings perform.
- Fiduciary Oversight: The audit confirms that Worcester, MA employers are serving the interests of plan participants, meeting their fiduciary responsibilities as required by ERISA.
- Verification of Plan Documentation: Confirming that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is a critical part of the audit.
Types of 401(k) Audits
There are two primary types of 401(k) Audits that Worcester, MA employers might come across, 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 required for most larger 401(k) plans. In a full-scope audit, the independent auditor evaluates all components of the plan, including financial statements, compliance with Department of Labor (DOL) and IRS regulations, and participant data. The auditor reviews supporting documentation for contributions, withdrawls, 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 pertain to 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 significantly reduce the audit’s complexity and cost. This could make it a more attractive option for some Worcester, MA businesses, if they satisfy the criteria.
The specific audit required is determined by your plan’s unique features, such as the nature of its investments. At Correct Capital, we will guide you to understand which type of audit your plan requires and help you be well-prepared for whichever process is necessary.
401(k) Audit Pain Points for Worcester, MA Employers
While 401(k) audits must be conducted to ensure compliance, they often present significant challenges for Worcester, MA 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 a lengthy process. Employers frequently have difficulties to arrange and submit the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Keeping pace with shifting DOL, IRS, and ERISA regulations can be challenging. Compliance oversights can result in audit failures, sanctions, and expensive fixes later on.
- Discrimination Testing: Making sure that the plan isn’t top-heavy demands thorough checks for compliance and can lead to additional documentation and reporting.
- Time and Resource Demands: Audit preparation takes HR professionals, business owners, administrators, and others away from their core responsibilities, increasing stress and shifting focus from day-to-day operations.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 properly and punctually, which is essential to 401(k) compliance. Failing to meet the submission date could cause penalties and cause additional problems for the company.
At Correct Capital, we are aware of the difficulties involved and provide tailored support to streamline the audit procedure in Worcester, MA. From assisting with document collection or ensuring compliance 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 Worcester, MA employers looking to lower 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 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, reducing the cost and complexity of managing and auditing individual plans. This setup permits Worcester, MA 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 participate in a collective 401(k) plan administered by a pooled plan provider (PPP). This structure streamlines the regulatory process and reduces costs, making it appealing for Worcester, MA businesses looking to streamline their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, while still ensuring compliance with federal regulations. Switching to these types of plans may be highly beneficial for smaller firms in Worcester, MA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Worcester, MA 401(k) Audit Team
401(k) audits can be daunting, but selecting the proper assistance can greatly improve the process. Collaborating with experts that understands both the technical and practical aspects of the audit process helps you avoid unnecessary delays and anxiety. Here’s why having the right experts on your side is important:
- Experience and Expertise: A highly experienced group will be familiar with the nuances of 401(k) audits, covering 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: Every 401(k) plan is different. An experienced team will partner 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, and represents 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: Getting ready for a 401(k) audit can take considerable time away from day-to-day operations. The ideal support will take on much of the administrative burden, enabling your HR and finance teams the freedom to concentrate on other tasks. 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 no longer necessary, you're still required to comply with all the rules and regulations, just with less administrative burdens after plan year end.
*as of March 2024
Working with a experienced, reliable team is crucial for guaranteeing your 401(k) audit in Worcester, MA is as painless as possible. With Correct Capital as your partner, 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 Worcester, MA
Adhering to 401(k) audit regulations is both a regulatory obligation and an opportunity to ensure your Worcester, MA company's retirement plan stays advantageous to your employees. Correct Capital’s knowledge of helping Worcester, MA businesses navigate 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 arrange a session and we'll guide you prepare for a smooth, efficient audit. Our team of experts will support you with everything, including document collection to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Worcester, MA advisor team, contact us online, or call us at 877-930-401(k) to begin.
