Running a company has those hidden nightmares like the 401k audit can be something that ruins your week or month. First-timers are going to have a much tougher time than those that have handled these in the past. Below are things that you need to know and keep in mind when it comes to your company’s 401k audit.
What is it Exactly?
A CPA audits a 401k plan’s financial health to make sure a company is holding up their end of the agreement to its employees. Larger plans and companies might have to deal with an additional piece of paperwork in the Form 5500. A 401k audit is to ensure that anything done with the fund was done legally and within federal restrictions. If there are some shortcomings in the audit these will also be fixed going forward.
What Do You Need?
The audit is mandatory and enforced by the Employee Retirement Security Act to help ensure that funds are not misappropriated and retirement accounts drained. There is a compliance check to make sure everything is within IRS and the Department of Labor’s rules. The audit will also confirm the accuracy of the report filled out in Form 5500. Large plan audits are reserved for those companies that have 100 or more eligible participants. These are more extensive audits due to the amount of money in the 401k fund.
Tips to Make It Go Smoothly
There are going to be a multitude of documents that you are going to have to provide. Online accounting systems can make it easy to provide these along with any other information needed. The more integration within a financial system of a company the easier it will be to find all necessary documentation. Using separate systems can lead to mistakes or a tough time finding a specific transaction or document.
Payroll integration will be an easy way to identify and eliminate mistakes. The 401k deduction from a paycheck being automated allows for a smooth audit to be completed. The one drawback is that a number of integrated platforms do not have a compliance check which can still leave a business vulnerable.
Hiring a 3(16) fiduciary will place the responsibility of running the 401k plan of the company. This representative will handle nearly everything when it comes to an audit. With the right representative and easy to find documents this audit could take a matter of hours to complete.
Finding a Quality 401k Auditor
The location of the 401k auditor matters as you can easily drop off documentation or discuss the next steps. Remote auditors can be an option but a number of people like to be in close proximity to the auditor they are working with.
The volume of 401k audits that are done matters as they could be the main source of income or a side revenue stream. You want an auditor that does this day in and day out. Being able to knock this out in a matter of a day can allow you to focus on other areas of your business.
The cost of the auditor needs to be a factor as should their relevant experience with plans identical or extremely similar 401k plans. Enlisting the help of a professional can save you time as well as a headache!