There are many benefits to having a 401(k) plan for your employees, such as retirement savings for your team, reduced taxes on wages, and reduced taxes for the employer, to name a few.
However, there are responsibilities as well, and the employer carries the responsibility for the compliance of the plan.
Every company that has a 401(k) plan, even if it’s just one member, is required to file a 5500 form with the IRS.
If you have 100 or more employees, the IRS generally requires an audit performed by a third-party auditor.
Even if you’re not yet required to perform an audit, this is a great opportunity to check your controls and data to make sure there are no errors in contributions. We’re all only human after all.
Myth #1: Anyone can do our audit; it doesn’t need to be a specialized firm.
No one likes nasty surprises, and that’s why we recommend using a professional audit firm. Choosing to forgo having a formal audit done may leave you vulnerable to an audit by the IRS or DOL.
At Cassell Plan Audits, we specialize in audits for 401(k) plans and have developed a streamlined digital process that completes a good portion of the preliminary work ahead of the audit.
Typically, we have only one on-site workday and make every effort to simplify the process. The systems we use, developed through years of experience, make us very efficient at what we do.
Myth #2: The auditor will take care of the entire thing and I don’t need to be involved, right?
Unfortunately, we can’t do all the work without the help of our clients. The benefits plan sponsor (typically the employer) is responsible for providing all necessary information to the auditor (much of which includes sensitive data like demographic and/or personal information).
We know the word audit can imply stress, but the process doesn’t need to be painful.
Keeping good records, digitizing for easy access if possible, and adhering to what information/data the auditor requests help make the audit process smooth.
Myth #3: We’ll just switch auditors every few years and save a boatload of money
It can be very tempting to switch auditors every few years in an attempt to save money or to use your CPA, who is not a specialist.
Your auditor needs to be knowledgeable of your specific plan as outlined in your official plan document. Staying with one firm saves money in the long run because they already have intimate knowledge of your plan.
Switching firms also causes more work for your HR department or team members who are responsible for overseeing the audit. Having to learn how different audit firms operate every few years can add more stress to the process.
Fact #1: A seasoned auditor can save you time and money
The biggest misnomer is that your 401(k) plan is a ‘set it and forget it’ aspect of your business. But having a trusted, professional auditor will keep the process simple, clear, and as quick as possible.
Each year we do a blog on the top insights from that season to help highlight what compliance issues arise during the most recent audit period.
Using systems developed over fifty years of experience and an efficient digital process saves our clients time and money.
Your CPA may have a great auditor in their resource list. If not, check us out at Cassell Plan Audits. Contact us at 630.886.7669 for more information and to schedule your appointment.
