401(k) for small business in Ballwin, MO. Setting up a 401(k) plan for your small business in Ballwin, 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 attracting top talent, offering a 401(k) plan also offers numerous tax benefits for both employers and employees. But, some business owners might not be sure if they want to move forward because of the time commitment, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Ballwin, MO financial advisors and retirement consultants help companies of all sizes offer 401(k) plans that fit their business and provide stability for their employees. 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' retirement accounts. Call Correct Capital today at 877-930-4015 or fill out our online form to get started with establishing a 401(k) for your small business in Ballwin, MO.
Should I Establish a 401(k) For My Ballwin, MO Small Business?
Establishing and operating a 401(k) for a small business in Ballwin, MO has numerous benefits, for you, your workers, and your business's bottom line:
- Attract and keep top employees — Offering retirement plans is an important tool for recruiting and retaining skilled workers, especially if many Ballwin, MO companies are hiring for the same position. Some employees will even quit their job over a 401(k), 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 deductions — Both businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions do not exceed the annual corporate tax deduction limit on employer contributions, as stipulated in section 404 of the Internal Revenue Code. The federal government also offers tax credits when companies 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 feel more confident about how they'll spend their golden years. Greater financial security ultimately leads to more productivity.
- Decreased liability — Employers take on a fiduciary responsibility to their employees when they offer retirement plans, which involves a a deep level of investment comprehension and obligations. If you partner with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), most of that liability will go to them.
- Ease of administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll handle the critical tasks of employee education, compliance, and administrative tasks on your behalf, so you can reap the rewards of offering a plan without much nuisance. Moreover, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new company, they can effortlessly perform a 401(k) rollover to an IRA or new 401(k) without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Ballwin, MO?
Depending on your industry, 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 have a diversity of investments that may include mutual funds, index funds, bonds, and company stock. 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 annual tests to ensure the plan doesn't discriminate in favor of highly compensated employees. 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 the limit is $30,000.
Ballwin, 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 differently than with a Roth deferral. 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 money the employee's already paid taxes on, meaning the money grows tax-free and the savings and any gains can be withdrawn tax-free, 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 increasingly popular as they allow plan participants to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as a business owner you would be obligated to make contributions that are fully vested when made. To meet Safe Harbor requirements, you have four options:
- 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 choose to opt out or contribute a different amount. The default contribution rate starts at 3% and increases by 1% annually until it reaches a maximum of 6%, unless the employee elects a different contribution rate.
Because you are required to make contributions, your company 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 a business where the only employee is a spouse. Contributions can be deducted from taxable income and gains grow tax-deferred until withdrawn. This allows participants to make higher contributions 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 employees. If you're considering setting up a 401(k) plan for your small Ballwin, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Small Ballwin, MO Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Ballwin, MO employers might 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 some of the many ways that our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A handful of quick internet searches are a poor replacement for years of experience and everyday interaction with retirement plans. Financial advisors can work with small business owners to develop a 401(k) plan meant specifically to benefit their company. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and operating a plan — There are specific steps you must take when establishing your small business 401(k). You have to:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Develop 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 your 401(k).
- Advertising your 401(k) plan to prospective 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 bridge 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 qualified to perform 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' savings for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will help them. 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 abide by various rules and contribution limits when offering a 401(k) plan. Not following them can lead to harsh penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interest of their employees. We are ethically and legally bound 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 remarkable value to Ballwin, 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 save on taxes and make their business more attractive to current and potential employees.
Call Correct Capital to Set Up a 401(k) For Your Small Business in Ballwin, MO
If you own a small business in Ballwin, MO, you want to spend your time on what you do best and what you're passionate about – not being bogged down by retirement plan responsibilities 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 Ballwin, MO business today, call Correct Capital at 877-930-4015 or contact us online.
