401 (k) for small business in Arnold, MO. Creating a 401(k) plan for your small business in Arnold, MO provides numerous benefits to both you and the people that work for you, helping businesses offer more security and benefits to people in the job market. In addition to offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees lower their tax liability. But, some business owners might not be sure if they want to move forward because of the time involved in establishing and maintaining a plan, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Arnold, MO financial planners and retirement consultants help companies of all sizes offer 401(k) plans that fit what their business needs and what their employees want. 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. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to learn more about 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 can do wonders for you, your workers, and your business's bottom line:
- Attract and keep great employees — Offering a 401(k) plan can be an essential asset for recruiting and keeping skilled talent, especially in a competitive Arnold, MO job market. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if they are offered to people beyond the highest ranking employees.
- Tax benefits — Both businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not surpass the annual corporate tax deduction limit on employer contributions, as defined in section 404 of the Internal Revenue Code. The federal government also offers tax credits for first-time 401(k) plans and offering automatic enrollment. Employee contributions reduce their taxable income and their contributions grow tax free.
- Increased employee retirement savings — A 401(k) plan allows employees to feel better about how they'll live in retirement. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers owe a fiduciary duty to their employees when they provide retirement plans, which involves a wide range of investment comprehension and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), the majority of that fiduciary duty will be placed on them.
- Simple administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll manage the vast majority of employee education, compliance, and administrative duties on your behalf, so you can benefit from the rewards of offering a plan without much nuisance. Moreover, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can easily rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
Types of 401(k) Plans For Your Small Business in Arnold, MO
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. 401(k) plans are available to all businesses, regardless of how many employees they have:
In any 401(k) plan, employees can put funds into the account through payroll deductions. Most 401(k)s have a wide range of investment opportunities. Employers can employers can deposit an equal amount as their employees as an additional perk to employees. Most 401(k) plans must follow stringent nondiscrimination requirements, and perform yearly tests to ensure the plan doesn't favor highly compensated employees. The IRS sets 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 things to think about when setting up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — Contributions made with a traditional deferral are taxed at different times than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, lowering an employee's taxable income. Taxes are paid when the money is withdrawn.
With Roth deferrals, contributions are made with after-tax dollars, 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 money is taken out. Roth 401(k)s are becoming more popular as they allow plan participants to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner you would be required to make fully vested contributions to your employees' plans. 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 part of their pay contributed to the plan unless they decide not to. The default 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 intended for owner-only businesses, or businesses where the only employees are spouses. Contributions are tax deductible 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 a businesses owner. Unlike other 401(k) plans, individual 401(k)s are not subject to 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 considering opening a 401(k) plan for your small Arnold, MO business, schedule a meeting with one of our advisers today to learn more about the benefits and options available to you.
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 might still be uneasy, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some some of the many 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 meant specifically to benefit them. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and managing a plan — There are numerous requirements you must adhere to when initiating your small business 401(k). You have to:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Establish a record keeping system
- Provide plan information to eligible employees
A financial advisory firm can do all of that for you, and handle the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The phrase "401(k)" might appear on a job listing in a list of benefits, but many in the job market don't know the full benefits a plan provides. We can connect the words "401(k)" to definite steps to people living the golden years they always wanted.
- 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' money for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will benefit them. 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 the status of their retirement savings.
- Compliance — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to harsh fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally break with the regulations.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are ethically and legally required to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor can provide considerable value to Arnold, MO small business owners who want to experience the benefits of a 401(k) plan. By partnering 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 Arnold, MO
If you own a small business in Arnold, MO, you want to focus on why you started your business – 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 314-930-401(k) or contact us online.