401 (k) for small business in Ballwin, MO. Setting up a 401(k) plan for your small business in Ballwin, MO provides various benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. In addition to offering more benefits than competitors, offering a 401(k) plan also provides numerous tax benefits for both employers and employees. However, some business owners might not be sure if they want to move forward because of the time involved in setting up and maintaining an account, as well as the complex web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Ballwin, MO financial planners and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We do the financial and administrative work for you while you focus on making your business thrive. Call Correct Capital today at 314-930-401(k) or contact us online to get started with establishing a 401(k) for your small business in Ballwin, MO.
Benefits of Setting Up a 401(k) for Your Small Ballwin, MO Business
Establishing and maintaining a 401(k) for a small business in Ballwin, MO has numerous benefits, for you, your workers, and your business goals alike:
- recruit and retain top talent — Offering retirement plans is an important asset for attracting and retaining skilled talent, particularly in a competitive Ballwin, MO job market. One survey says 401(k) plans are the most important financial benefit to employees, 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 to the extent that the contributions do not exceed 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 enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — A retirement account allows employees to feel more confident about how they'll live in retirement. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers owe a fiduciary duty to their employees when they provide retirement plans, which involves a wide range of investment knowledge and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), most of that liability will go to them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the critical tasks of employee education, compliance, and administrative tasks on your behalf, so you can enjoy the rewards of offering a plan without much hassle. Furthermore, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new job elsewhere, they can simply perform a 401(k) rollover to a new retirement account without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in Ballwin, 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 size:
In any 401(k) plan, employees can put savings into the account through money taken out of their paychecks. Most 401(k)s have many different 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 benefit to employees. Most 401(k) plans must adhere to strict nondiscrimination requirements, and are subject to 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 you can contribute an additional $7,500 as a catch-up contribution.
Ballwin, MO businesses with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The main difference between traditional and Roth deferrals is the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning the contributions are made 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 there are no taxes when the money's withdrawn, 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 increasingly popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as an employer you would be obligated 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 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 decide not to. The default contribution rate starts at 3% and increases by 1% annually until it maxes out at 6%, unless the employee chooses a different contribution rate.
In exchange for required employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are intended for people who are self-employed, or a business where the only employee is a spouse. 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 a worker and an employer. Unlike other 401(k) plans, individual 401(k)s do not require annual filings with the IRS unless the account balance exceeds $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're considering setting up a 401(k) plan for your small Ballwin, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Small Ballwin, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Ballwin, 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 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 design a 401(k) plan meant expressly to benefit them. They can help choose the plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and managing a plan — There are specific steps you must take when initiating 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 do all of that for you, and oversee the operation and annual reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The term "401(k)" might appear on a job ad in a list of benefits, but many in the job market don't fully understand what a 401(k) can do for them. We can bridge the phrase "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 experienced with portfolio management will be able to offer market insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to optimally 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 good about 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 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 duty — As a plan sponsor, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are morally and legally obligated to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor can provide significant value to Ballwin, MO small business owners who want to experience the benefits of a 401(k) plan. By working 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 focus on why you started your business – not being distracted 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 Ballwin, MO business today, call Correct Capital at 314-930-401(k) or contact us online.