401(k) Audit Services in Torrance, CA. For Torrance, CA businesses that offer retirement plans, completing a 401(k) audit can seem like a challenging process. 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, there are many factors to consider. 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 create significant headaches even though they are a regulatory requirement. Our team will partner with you with every aspect of document collection to making sure Form 5500 is filed correctly and on time. Whether you're navigating your first audit in Torrance, CA, 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 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 Torrance, CA companies who have 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 are still required to have an audit if there are 100 who are eligible. The audit ensures that the retirement plan follows 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 faithfully recorded.
While necessary to meet legal requirements, 401(k) audits can be complicated and lengthy. Correct Capital assists Torrance, CA businesses navigate these audits by assisting with document collection, helping clarify compliance testing, etc... With the right support, getting through the audit can become a far more manageable task.
Why are 401(k) Audits Necessary for Torrance, CA Companies?
You must undergo a 401(k) audit for several 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 adheres to all legal requirements established by the Department of Labor (DOL) and the IRS, with emphasis under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit verifies whether the plan isn't overly advantageous to higher-paid employees (often known as “top-heavy” testing) in order to promote fairness across all participants.
- Identifying Operational Issues: Audits can uncover errors in contributions, distributions, or other facets of plan oversight, enabling you to resolve these issues before they result in fines.
- Filing Form 5500: The audit ensures proper and timely submission of Form 5500, an annual report summarizing the plan’s financial status, which is required to maintain compliance with DOL and IRS regulations.
- Contribution Limits: The audit confirms that employer and employee contributions remain within IRS contribution limits, reducing the risk of excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may review plan fees to confirm they are reasonable and not overly expensive for participants. Overpriced fees could lead to compliance concerns and hurt how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Torrance, CA employers are working to benefit plan participants, fulfilling 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 one of the most important parts of the audit.
Types of 401(k) Audits
There are two main categories of 401(k) audits that Torrance, CA employers could face, 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 thorough audit necessary for most larger 401(k) plans. In a full-scope audit, the independent 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, 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 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 obligated 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 better alternative for some Torrance, CA businesses, as long as they meet the criteria.
The type of audit you need is based on your plan’s specific details, like the nature of its investments. At Correct Capital, we are able to assist you determine which type of audit your plan is subject to and make sure you're ready for either process.
401(k) Audit Pain Points for Torrance, CA Employers
While 401(k) audits must be conducted to ensure compliance, they frequently pose difficulties for Torrance, CA employers, notably those overseeing more substantial retirement plans. These are some of the major issues that businesses face:
- Document Collection and Management: Assembling the necessary paperwork, such as account statements, tax returns, and employee data, can be labor-intensive. Employers frequently have difficulties to sort through and file the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Staying up to date with evolving DOL, IRS, and ERISA regulations can prove difficult. Compliance errors can cause audit failures, sanctions, and expensive fixes in the long run.
- Discrimination Testing: Ensuring that the plan isn’t top-heavy involves detailed compliance reviews and can lead to additional documentation and reporting.
- Time and Resource Demands: Audit preparation draws HR professionals, business owners, administrators, and others off of their core responsibilities, heightening pressure and distracting them from regular business activities.
- Form 5500 and Timely Submissions: Many businesses have difficulty with file Form 5500 properly and punctually, which is a key component of 401(k) compliance. Missing the deadline may lead to penalties and create further issues for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to streamline the audit procedure in Torrance, CA. 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 Torrance, CA employers seeking to reduce the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and Pooled Employer Plans can provide solutions. These plans permit various businesses to join a single 401(k) plan, frequently removing 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 Torrance, CA businesses to share the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): Introduced more recently, PEPs enable unrelated employers to participate in a collective 401(k) plan overseen by a pooled plan provider (PPP). This structure simplifies compliance and cuts costs, making it appealing for Torrance, CA 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. Transitioning into an MEP or PEP may be highly beneficial for smaller firms in Torrance, CA, that want to provide a 401(k) but struggle with the costs and administrative burdens.
Working with the Right Torrance, CA 401(k) Audit Team
401(k) audits can be daunting, but selecting the proper assistance can greatly improve the process. Working with a team that understands both the technical and practical aspects of the audit process reduces the time and pressure you face. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A team of experts will be familiar with the complexities of 401(k) audits, encompassing full-scope and limited-scope audits. We will assist you with 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: Every 401(k) plan is different. 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 handles more than 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 take considerable time away from day-to-day operations. The ideal support will shoulder a lot of the admin work, allowing your HR and finance teams the ability to address other important matters. Correct Capital helps streamline the process, easing the load for your internal team.
- MEPs and PEPs Expertise: For businesses enrolled in an MEP or PEP, while an audit specific to your plan is not required, you're still obligated to adhere to all the rules and regulations, though with a reduced administrative workload after plan year end.
*as of March 2024
Working with a knowledgeable, reliable team is crucial for guaranteeing your 401(k) audit in Torrance, CA runs efficiently and stress-free. With Correct Capital as your partner, you’ll have the confidence that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Torrance, CA
Complying with 401(k) audits is both a mandatory process and an opportunity to ensure your Torrance, CA company's retirement plan continues to offer maximum benefit to your employees. Correct Capital’s knowledge of helping Torrance, CA businesses through 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 book a meeting and let us help you get ready for a streamlined, effective audit. Our team of experts will assist with everything from document collection through to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Torrance, CA advisor team, contact us online, or call us at 877-930-401(k) to begin.
