No one in charge of their company’s annual 401K Audit has ever used the words “easy” or “fun” to describe the annual 401K audit process. However, with the proper guidance and knowledge the process can be smooth and stress free.
Offering a 401K plan to employees is a great way to attract talent to a business. Making sure that the plan is in compliance with IRS and DOL rules will ensure that this benefit doesn’t become a hassle.
A common question that comes into play is “Do I need a large plan Audit?” Generally, you will be required to file the plan under the status of “large,” if there were 100 or more participants. There is, however, an exception to this rule. The exception is known as the 80-100 rule. If during the previous year, you filed as a small plan and you haven’t surpassed the 120-employee threshold this year, you are able to file as a small plan.
What type of 401K Audit do I need?
There are two types of annual Audits that can be conducted. Full Scope, and Limited Scope; the most common being the Limited Scope. To qualify for a limited scope audit, an insurance carrier or bank must act as the trustee or custodian for the plan. In a full scope audit, audit work is performed on the plan’s investments, and is more in depth. We can assist you with a consultation to decide which plan suites your needs.
Benefits of Using a 401K Audit Service
Aside from legal obligations that require you to conduct a 401K Audit Service, there are a plethora of reasons to conduct routine Audits. Conducting routine audits can prevent oversights and potential issues before they ever become serious problems. Some of these benefits include:
- Making sure all employees have an opportunity to enroll.
- Ensuring Account statements accurately reflect participant financials.
- Determining that disbursements or plan benefit payments are correct and on time.
- Making sure that contributions are proper and made on time.
- Identifying issues or practices that could impact the plans status
- Verifying if prohibited transactions have occurred
- Assessing whether all assets are fairly valued.
After reading this information, you should be closer to a smoother and stress-free 401K Audit. Annual 401K Audits can be overwhelming, let us assist you with that. With over 30 years of industry experience, we at Ellrich, Neal, Smith & Stohlman, P.A, are dedicated to making this process smooth and efficient.