401(k) Audit Services in Palmdale, CA. For Palmdale, CA businesses that offer retirement plans, navigating a 401(k) audit can feel like a daunting task. Between regulation from the Department of Labor (DOL) and IRS, organizing necessary documents, and ensuring that your plan isn’t “top-heavy”, it can be overwhelming. However, with the right support, the 401(k) audit does not need to disrupt your business and disrupt your day-to-day operations.
At Correct Capital, we understand that 401(k) audits can be a major source of stress and are mandatory. Our team will partner with you with every aspect of document collection to meeting Form 5500 deadlines. Whether you're getting ready for your initial audit in Palmdale, CA, or seeking to simplify a previously cumbersome process, we're here to minimize the hassle. 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.
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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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About 401(k) Audits
A 401(k) audit is an yearly review required for Palmdale, CA companies with more than 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively contributing to the plan, you still need an audit if there are 100 who are eligible. The audit ensures that the retirement plan adheres to the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s financial integrity, ensuring that contributions, distributions, and operations are faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be challenging and demanding. Correct Capital helps Palmdale, CA businesses navigate these audits by aiding in document collection, ensuring comprehension of compliance testing, as well as other audit processes. With the right support, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Palmdale, CA 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 necessary:
- Compliance with DOL and IRS Regulations: Audits ensure that your 401(k) plan follows all legal requirements mandated 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 disproportionately benefits higher-paid employees (often referred to as “top-heavy” testing) to guarantee fairness across all participants.
- Identifying Operational Issues: Audits can uncover errors in contributions, distributions, or additional plan operations, allowing you to correct these issues before they result in penalties.
- Filing Form 5500: The audit guarantees proper and timely submission of Form 5500, a required document that outlines the plan’s financial status, necessary for ensuring compliance with DOL and IRS regulations.
- Contribution Limits: The audit ensures that employer and employee contributions remain within IRS contribution limits, reducing the risk of excess contributions that might trigger penalties.
- Fee Reasonableness: Auditors may review plan fees to confirm they are reasonable and don’t pose an excessive cost for participants. High fees can raise compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Palmdale, CA employers are acting in the best interest of plan participants, fulfilling their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Ensuring that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is a key part of the audit.
Types of 401(k) Audits
There are two main categories of 401(k) audits that Palmdale, CA employers might come across, based on the specific details 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 more comprehensive 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 examines supporting documentation for contributions, withdrawls, and other transactions to verify that everything is accurate and in compliance.
- Section 103(a)(3)(C)) Audit: Previously referred to as a "Limited Scope Audit," these are for plans with investments managed 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 is not required to audit the investment information certified by the financial institution, which can significantly reduce the audit’s complexity and cost. This could make it a better alternative for some Palmdale, CA businesses, as long as they meet the criteria.
The type of audit you need is based on your plan’s particular characteristics, including the nature of its investments. At Correct Capital, we are able to assist you understand which type of audit your plan requires and make sure you're ready for either process.
401(k) Audit Pain Points for Palmdale, CA Employers
While 401(k) audits are required to meet legal obligations, they often present significant challenges for Palmdale, CA employers, notably those offering bigger 401(k) plans. Here are some of the key pain points that employers encounter:
- Document Collection and Management: Collecting the right documents, such as account statements, tax returns, and employee data, can be a lengthy process. Employers may find it challenging to organize and submit the necessary paperwork, especially for larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with changing DOL, IRS, and ERISA regulations can be challenging. Compliance errors can cause audit failures, fines, and expensive fixes in the long run.
- Discrimination Testing: Verifying 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 draws HR professionals, business owners, administrators, and others away from their core responsibilities, adding strain and distracting them from regular business activities.
- 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. Failing to meet the submission date could cause penalties and create further issues for the company.
At Correct Capital, we understand these challenges and provide tailored support to make the audit process in Palmdale, CA less stressful. Be it document collection or ensuring compliance with 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 Palmdale, CA employers hoping to ease the workload of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can offer relief. These plans allow unrelated employers to consolidate into one 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 Palmdale, CA businesses to divide the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs allow unrelated employers to participate in a collective 401(k) plan overseen by a pooled plan provider (PPP). This structure makes meeting regulations easier and lowers expenses, making it attractive for Palmdale, CA businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can substantially decrease the costs and time required for audits, while still ensuring compliance with federal regulations. Switching to these types of plans may be especially appealing to smaller businesses in Palmdale, CA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Palmdale, CA 401(k) Audit Team
401(k) audits can seem difficult, but selecting the proper assistance changes everything. Partnering with professionals that is well-versed in both the technicalities and practicalities 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 is knowledgeable about the nuances of 401(k) audits, covering both full-scope and limited-scope audits. We help you navigate the documentation process and help identify areas of improvement 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 understand 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, which allows us to understand the nuances of any company 401(k) plan.
- Saving Time and Resources: Audit preparation can distract you significantly from day-to-day operations. The proper team will shoulder a lot of the admin work, allowing your HR and finance teams the ability to address other important matters. Correct Capital makes the process smoother, taking the stress off 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, just with less administrative burdens after plan year end.
*as of March 2024
Working with a well-informed, reliable team is key to ensuring your 401(k) audit in Palmdale, CA runs efficiently and stress-free. With Correct Capital supporting you, 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 Palmdale, CA
Complying with 401(k) audits is both a legal requirement and an important way to confirm your Palmdale, CA company's retirement plan stays advantageous to your employees. Correct Capital’s knowledge of helping Palmdale, CA businesses complete the 401(k) audit helps ease the burden, enabling you to concentrate on your operations while avoiding fines for non-compliance.
Contact Correct Capital today to schedule a consultation and let us help you get ready for a streamlined, effective audit. 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 Palmdale, CA advisor team, contact us online, or call us at 877-930-401(k) to get started.
