401(k) Audit Services in Rockford, IL. For Rockford, IL businesses offering their employees retirement plans, completing a 401(k) audit can feel like a daunting task. Between regulation from the Department of Labor (DOL) and IRS, gathering a large amount of paperwork, and ensuring that your plan doesn't favor higher-paid employees, 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 even though they cannot be avoided. Our team will assist you for everything from document collection to making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in Rockford, IL, or looking to streamline a previously cumbersome 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, 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 mandated for Rockford, IL companies who have at least 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively enrolled in the plan, you must still undergo an audit if there are 100 who are eligible. The audit confirms that the retirement plan complies with the regulations established by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It evaluates the plan’s overall financial health, ensuring that contributions, withdrawals, and operations are faithfully recorded.
While necessary for compliance, 401(k) audits can be complicated and demanding. Correct Capital helps Rockford, IL businesses get ready for these audits by aiding in document collection, ensuring comprehension of 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 Rockford, IL Companies?
You are required to undergo a 401(k) audit for multiple purposes, to ensure retirement plans stay in line 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 set by the Department of Labor (DOL) and the IRS, especially under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit verifies whether the plan disproportionately benefits higher-paid employees (often referred to 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 other facets of plan oversight, providing an opportunity to fix these issues to avoid penalties.
- Filing Form 5500: The audit ensures proper and timely submission of Form 5500, a yearly filing that outlines 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, preventing excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may examine plan fees to verify they are reasonable and not overly expensive for participants. Excessive fees may prompt compliance concerns and affect the long-term growth of employee retirement savings.
- Fiduciary Oversight: The audit verifies that Rockford, IL employers are serving the interests of plan participants, satisfying their fiduciary responsibilities as outlined in ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are in compliance with regulatory guidelines is a vital part of the audit.
Types of 401(k) Audits
There are two primary types of 401(k) Audits that Rockford, IL employers may encounter, 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 more comprehensive audit mandated for most larger 401(k) plans. In a full-scope audit, the third-party auditor examines every part of the plan, such as 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 confirm correctness and adherence to regulations.
- Section 103(a)(3)(C)) Audit: Formerly known as a "Limited Scope Audit," these are for 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 does not need to audit the investment information verified by the financial institution, which can greatly lessen the audit’s complexity and cost. This could make it a more attractive option for some Rockford, IL businesses, if they satisfy the criteria.
The specific audit required is determined by your plan’s particular characteristics, such as the nature of its investments. At Correct Capital, we are able to assist you figure out which type of audit your plan needs and help you be well-prepared for whichever process is necessary.
401(k) Audit Pain Points for Rockford, IL Employers
While 401(k) audits are necessary for compliance, they frequently pose difficulties for Rockford, IL employers, particularly those offering bigger 401(k) plans. Below are several common challenges that businesses face:
- Document Collection and Management: Assembling the necessary paperwork, such as account statements, tax returns, and employee data, can be time-consuming. Employers often struggle to arrange and file the necessary paperwork, particularly with larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with evolving DOL, IRS, and ERISA regulations is difficult. Compliance missteps can cause audit failures, penalties, and pricey amendments later on.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy requires careful compliance checks and can lead to additional documentation and reporting.
- Time and Resource Demands: Preparing for an audit takes HR professionals, business owners, administrators, and others away from their core responsibilities, adding strain and diverting attention from regular business activities.
- Form 5500 and Timely Submissions: Many businesses struggle to file Form 5500 accurately and on time, which is a key component of 401(k) compliance. Missing the deadline may lead to penalties and complicate things for the company.
At Correct Capital, we are aware of the difficulties involved and deliver personalized help to make the audit process in Rockford, IL smoother. From assisting 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 Rockford, IL employers seeking to reduce the workload of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can provide solutions. These plans enable different employers to consolidate into one 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 permits Rockford, IL businesses to distribute the administrative responsibilities and potentially avoid the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs allow unrelated employers to join a shared 401(k) plan overseen by a pooled plan provider (PPP). This structure makes meeting regulations easier and reduces costs, making it appealing for Rockford, IL businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can dramatically cut down the expenses and time involved in audits, while ensuring regulatory compliance. Moving to one of these plans may be highly beneficial for smaller firms in Rockford, IL, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Rockford, IL 401(k) Audit Team
401(k) audits can appear challenging, but choosing the right support can greatly improve the process. Collaborating with experts that is well-versed in both the technicalities and practicalities 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 understands the details 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 helps you remain up to date with evolving regulations, making sure your plan complies with all required guidelines.
- 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 help you prepare 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: Preparing for a 401(k) audit can take considerable time away from day-to-day operations. The right partner will handle most of the administrative tasks, enabling your HR and finance teams the ability to address other important matters. Correct Capital simplifies the entire process, 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 no longer necessary, you're still required to comply with 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 essential to making sure your 401(k) audit in Rockford, IL is as painless as possible. With Correct Capital as your partner, 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 Rockford, IL
Meeting 401(k) audit requirements is both a mandatory process and an opportunity to ensure your Rockford, IL company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s knowledge of helping Rockford, IL businesses complete the 401(k) audit reduces the strain, enabling you to concentrate on your operations while avoiding fines for non-compliance.
Contact Correct Capital today to arrange a session and allow us to assist you get ready for a streamlined, effective audit. Our team of experts will assist with everything from document collection to compliance checks, guaranteeing your plan is prepared for success. You can schedule a meeting with a member of our Rockford, IL advisor team, contact us online, or call us at 877-930-401(k) to start the process.
