401(k) for small business in Ballwin, MO. Initiating a 401(k) plan for your small business in Ballwin, MO provides numerous benefits to both you and the people that work for you, helping businesses stand out and provide a more secure to their employees. In addition to 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 may still be cautious because of the time commitment, in addition to 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 successful 401(k) plans. We do the financial and administrative work for you while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to learn more about creating 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 can do wonders for employers, your workers, and your business's bottom line:
- Attract and retain great talent — Providing a 401(k) plan can be a valuable asset for recruiting and keeping top talent, especially if many Ballwin, MO companies are advertising 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 employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions do not exceed the yearly 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 businesses first set up a 401(k) plan, and if the employer offers automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers owe a fiduciary responsibility to their employees when they provide 401(k) plans, which involves a a deep level of investment knowledge and obligations. If you partner with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), the bulk of that fiduciary duty will go to them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the critical tasks 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. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new job elsewhere, they can simply rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
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. However many employees you have, there is a 401(k) plan that will work for you:
In any 401(k) plan, employees can contribute through payroll deductions. Most 401(k)s offer a diversity of investment options. Employers can employers can deposit an equal amount as their employees as an added benefit to employees. Most 401(k) plans must follow strict nondiscrimination requirements, and are subject to yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case the limit is $30,000.
Ballwin, MO businesses with multiple employees have a few different considerations to make 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. 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 been contributing for at least five years and is 59-½ years old when the withdrawal is made. 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 decide to set up a Safe Harbor 401(k), as a business owner you would be obligated to make fully vested contributions to your employees' accounts. 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, 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 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% each year until it reaches a maximum of 6%, unless the employee decides on 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 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 are not subject to annual filings with the IRS unless the account balance is more than $250,000.
What plan works best for your and your employees depends on your business and employees. If you're interested in setting up a 401(k) plan for your small Ballwin, MO business, make an appointment with a member of our team today to find out more about the benefits and options available to you.
How a Financial Advisor Can Help Your Ballwin, MO Small Business With Your 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Ballwin, MO employers may still be cautious, as they may not have the know-how, time, or interest to establish and operate a plan. That’s where a financial advisor can help. Here are some ways that a financial advisor can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A handful of 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 specifically to benefit their business. 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 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 participant
A financial advisory firm can assist with all of the above requirements, and handle the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might show up 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 definite steps to people living the golden years of their dreams.
- 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 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 benefit 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 — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to harsh fines. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary duty — When offering a retirement plan, 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 considerable value to Ballwin, MO small business owners who are looking to create 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 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 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 314-930-401(k) or contact us online.