401(k) for small business in St. Louis. Setting up a 401(k) plan for your small business in St. Louis can offer various benefits to both employers and employees, helping businesses to stand out and provide long-term financial security to their employees. In addition to attracting top talent, offering a 401(k) plan also affords numerous tax benefits for both employers and employees. But, some business owners may still be wary because of the time involved in establishing and maintaining an account, as well as the complex web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our St. Louis financial advisors and retirement consultants work with companies large and small to offer customized and successful 401(k) plans. We take the heavy financial lifting off your plate, so you can focus on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-401(k) or contact us online to get started with setting up a 401(k) for your small business in St. Louis.
Benefits of Setting Up a 401(k) for Your Small St. Louis Business
Setting up and maintaining a 401(k) for a small business in St. Louis has numerous benefits, for employers, employees, and your business goals alike:
- Attract and retain top talent — Offering a 401(k) plan can be a valuable tool for attracting and retaining top talent, especially in a competitive St. Louis job market. Employees see a 401(k) as a valuable benefit, and offering one can help differentiate your business from competitors, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax benefits — Both employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make are tax deductible up to the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several tax credits for first-time 401(k) plans and offering automatic enrollment. Employees can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — A 401(k) plan allows employees to save for retirement through automatic contributions deducted from their paychecks. This can help increase employee retirement savings, which can help them feel more financially secure, ultimately making them more productive.
- Reduced liability — Employers assume a fiduciary duty to their employees when they offer 401(k) plans, which involves a wide range of investment knowledge and responsibilities. If you work with an ERISA 3(38) Fiduciary provider to set up and operate your small business's 401(k), the bulk of that fiduciary duty will be passed onto them, reducing the liability you may have.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the lion's share of employee education, compliance, and administrative tasks for you, so you can reap the rewards of offering a plan without putting in too much work yourself. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can easily perform a 401(k) rollover to an IRA or new 401(k) without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in St. Louis
Depending on what industry you're in, your "small business" may have up to 1,500 employees, or it may just be yourself. However many employees you have, there is a 401(k) plan that will work for you:
In any 401(k) plan, employees can put funds into the account through payroll deductions. Most 401(k)s offer a wide range of investment options, and employers can make matching contributions as an added benefit to employees. Most 401(k) plans must meet strict nondiscrimination requirements, and undergo annual tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you turn 50 or older this year, in which case you can contribute an additional $7,500 as a catch-up contribution.
St. Louis employers with multiple employees have a few different options in how they set up their 401(k) plan:
- Tradition vs. Roth 401(k) Deferrals — The key difference between traditional and Roth deferrals is when your employees pay taxes on their contributions. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited before taxes are taken out, lowering an employee's taxable income. When the money is withdrawn it is taxed as ordinary income at the employee's tax rate at the time of withdrawal.
With Roth deferrals, contributions are made with after-tax dollars, meaning the money grows tax-free and the savings and any gains can be withdrawn tax-free, so long as the plan participant has had the account for five years and is 59-½ years old when the withdrawal is made. Roth 401(k)s are becoming more popular as it allows employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be required to make contributions that are fully vested when made. There are four ways in which an employer can contribute:
- In a non-elective contribution, an employer must contribute 3% of each eligible employee's compensation to the plan, regardless of whether the employee chooses to contribute to the plan.
- With matching contributions, the employer must match 100% of each eligible employee's contributions up to 3% of their compensation, plus an additional 50% match on the next 2% of their compensation.
- Enhanced Safe Harbor plans provide a 100% employer match on up to 4% of an employee's compensation.
- In a Qualified Automatic Contribution Arrangement (QACA), employees are automatically enrolled in the plan and have a portion of their pay contributed to the plan unless they choose to opt out or contribute a different amount. The default contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 6%, unless the employee elects a different contribution rate.
In exchange for required employer contributions, Safe Harbor plans are not subject to nondiscrimination testing. Each year, employers must give timely notice to eligible employees describing the employees' rights, the details of the plan, and relevant income tax regulations.
Solo or Individual 401(k) Plan
These are intended for people who are self-employed, or businesses where the only employees are spouses. Contributions are tax deductible and earnings grow tax-deferred until withdrawn. This type of retirement account allows individuals to make contributions both as an employer and as an employee, providing higher contribution limits than many other individual-based retirement plans. Unlike other 401(k) plans, individual 401(k)s do not require annual filings with the IRS unless the account balance exceeds $250,000.
What plan works best for your and your employees depends on your business and your and your employees' needs. If you're thinking of opening a 401(k) plan for your small St. Louis business, make an appointment with a member of our team today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Small St. Louis Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some St. Louis employers may still be wary, as managing a 401(k) plan is complex and time-consuming. That’s where a financial advisor can help. Here are some ways that a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A few detailed Google searches are a poor replacement for years of experience and everyday interaction with retirement plans. Financial advisors can work with small business owners to design a 401(k) plan that meets the specific needs of their business and employees. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and operating a plan — There are numerous requirements you must follow when establishing your small business 401(k). You must:
- Adopt a written plan document
- Arrange a trust for plan assets
- Establish a record keeping system
- Provide plan information to eligible employees
A financial advisory firm can assist with all of the above requirements, and oversee the operation and annual reviews of the plan.
- Marketing your 401(k) plan to prospective employees — The term "401(k)" might show up on a job listing as a bullet point, but many in the job market don't know the full benefits a plan provides. We can connect the words "401(k)" to concrete images of a more secure retirement, with very clear stepping stones on how to get there.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in portfolio management will be able to offer market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to best position employees' funds for further growth.
- Employee education — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' employees so they're confident with how their money is being held and invested.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to stiff penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently fail to comply with a requirement.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interests of plan participants. We are ethically and legally bound to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor can provide significant value to St. Louis small business owners who are looking to establish a 401(k) plan. By working with a financial advisor, small business owners can provide a valuable benefit to their employees while also managing risk and ensuring the plan’s long-term success.
Call Correct Capital to Set Up a 401(k) For Your Small Business in St. Louis
If you own a small business in St. Louis, you want to spend your time on what you do best and what you're passionate about – not being bogged down by administrative tasks you may or may not be knowledgeable about. As a Registered Investment Advisor with CERTIFIED FINANCIAL PLANNER® professionals, Correct Capital can both help position your and your employees' money for growth while giving you peace of mind that your small business's 401(k) plan is being operated efficiently and correctly. To start setting up a 401(k) for your small St. Louis business today, call Correct Capital at 314-930-401(k) or contact us online.