401(k) for small business in Arnold, MO. Initiating a 401(k) plan for your small business in Arnold, MO can offer various benefits to both you and the people that work for you, helping businesses offer more security and benefits to prospective employees. Beyond just offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners might not be sure if they want to move forward because of the time involved in setting up and maintaining a plan, as well as the complex web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Arnold, MO financial advisors and retirement consultants help companies of all sizes offer customized and successful 401(k) plans. We do most of the work for you while you focus on making your business flourish. Call Correct Capital today at 877-930-4015 or contact us online to get started with setting up a 401(k) for your small business in Arnold, MO.
Should I Establish a 401(k) For My Arnold, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Arnold, MO has numerous benefits, for employers, your employees, and your business goals alike:
- recruit and keep top employees — Offering a 401(k) plan is a valuable asset for recruiting and retaining accomplished employees, especially if many Arnold, MO companies are advertising for the same job. Employees see a 401(k) as a valuable benefit, and offering one can help your business stand out, especially if they are offered to people beyond the highest earners.
- Tax benefits — Both employers and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions employers make are tax deductible up to the annual corporate tax deduction limit on employer contributions, as laid out in section 404 of the Internal Revenue Code. There are also several tax credits when employers first set up a 401(k) plan, and if the employer offers 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. Greater financial security eventually leads to a more productive workforce.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they provide retirement plans, which involves a wide range of investment knowledge and obligations. If you work with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), much of that liability will go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the lion's share of employee education, compliance, and administrative responsibilities on your behalf, so you can benefit from the rewards of offering a plan without putting in too much work yourself. Furthermore, advisors can help integrate contributions with your payroll system 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 you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Arnold, MO?
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:
401(k) Plans
In any 401(k) plan, employees can put savings into the account through payroll deductions. Most 401(k)s offer a wide range of investment opportunities. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must adhere to strict nondiscrimination requirements, and undergo annual tests to ensure the plan doesn't favor highly compensated employees. The IRS mandates contribution limits each year; in 2023 that 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.
Arnold, MO employers with multiple employees have a few different considerations to make when setting up their 401(k) plan:
- Traditional 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 contributions are made before taxes are taken out, and the employee can then deduct the amount contributed from their taxable income. Taxes are paid when the money is withdrawn.
With Roth deferrals, contributions are made with money the employee's already paid taxes on, meaning the money grows tax-free and there are no taxes when the money's withdrawn, as 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 they allow employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as an employer you would be required to make fully vested contributions to your employees' plans. To meet Safe Harbor requirements, you have four possible ways to contribute:
- In a non-elective contribution, an employer must contribute 3% of each eligible employee's compensation to the plan, whether or not the employee chooses to themselves.
- 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 percentage of their pay contributed to the plan unless they decide not to. The automatic contribution rate starts at 3% and increases by 1% annually until it reaches a maximum of 6%, unless the employee chooses a different contribution rate.
Because you are required to make contributions, your business would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are are meant for owner-only businesses, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and the money is taxed when it's withdrawn. This allows participants to save more as they can make contributions both as an employee and an employer. Unlike other 401(k) plans, individual 401(k)s do not require annual filings with the IRS unless the account balance is more than $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're interested in opening a 401(k) plan for your small Arnold, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Small Arnold, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Arnold, MO employers may still be uneasy, as they may not have the knowledge, time, or interest to establish and operate a plan. That’s where we come in. Here are some ways that our advisory firm can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few quick internet searches can't come close to offering the same level of skill and experience as a licensed advisory firm. Financial advisors can partner with small business owners to develop a 401(k) plan meant expressly to benefit their business. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and managing a plan — There are numerous requirements you must follow when initiating your small business 401(k). You must:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Develop a record keeping system
- Provide plan information to participant
A financial advisory firm can do all of that for you, and oversee the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to potential employees — The term "401(k)" might appear on a job ad 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 a clear road map of 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 provide investment insight, as well as work within investment concepts 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 feel at ease with how their money is being held and invested.
- Compliance — Employers must adhere to various rules and contribution limits when offering a 401(k) plan. Not following the rules correctly 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 — When offering a retirement plan, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are morally and legally required 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 Arnold, MO small business owners who want to experience the benefits of a 401(k) plan. By consulting with a financial advisor, small business owners can save on taxes and make their business more attractive to current and prospective employees.
Call Correct Capital to Start a 401(k) For Your Small Business in Arnold, MO
If you own a small business in Arnold, MO, you want to focus on what you do best and what you're passionate about – not being bogged down by retirement plan responsibilities you may not have the time, knowledge, or interest to manage. 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 Arnold, MO business today, call Correct Capital at 877-930-4015 or contact us online.
