401(k) for small business in Belleville, IL. Setting up a 401(k) plan for your small business in Belleville, IL provides numerous benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. Beyond just offering more benefits than competitors, providing a 401(k) plan also affords 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, as well as the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Belleville, IL financial planners and retirement consultants work with companies large and small to offer 401(k) plans that fit what their business needs and what their employees want. We take the heavy financial lifting off your plate while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or complete our online form to learn more about creating a 401(k) for your small business in Belleville, IL.
Do I Need a 401(k) For My Belleville, IL Small Business?
Establishing and maintaining a 401(k) for a small business in Belleville, IL has numerous benefits, for employers, your workers, and your business goals alike:
- Attract and keep top talent — Offering a 401(k) plan is an important tool for recruiting and retaining top talent, particularly in a competitive Belleville, IL job market. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax deductions — Both businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions are not more than the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. The federal government also offers tax credits when employers first set up a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased financial security for employees — A retirement account 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 offer retirement plans, which involves a a deep level of investment knowledge and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), much of that fiduciary duty will go to them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the critical tasks of employee education, compliance, and administrative responsibilities for you, so you can reap the rewards of offering a plan without putting in too much work yourself. Additionally, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new job elsewhere, they can easily rollover their 401(k) to a new retirement account without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Belleville, IL?
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 contribute through payroll deductions. Most 401(k)s have many different investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an added benefit to employees. Most 401(k) plans must meet stringent nondiscrimination requirements, and are subject to yearly tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case you can contribute an additional $7,500 as a catch-up contribution.
Belleville, IL companies with multiple employees have a few different options in how they set 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 the money is deposited before taxes are taken out, and the employee can then deduct the amount deposited from their 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, so long as the plan participant has been contributing for at least five years and is 59-½ years old when the money is taken out. Roth 401(k)s are becoming increasingly 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 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, whether or not the employee decides 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 money is taken out of their paycheck unless they choose to opt out or contribute a different amount. The automatic contribution rate starts at 3% and increases by 1% each year until it maxes out at 6%, unless the employee decides on 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 intended for people who are self-employed, or a business where the only employee is a spouse. Contributions are tax deductible and the money is taxed when it's withdrawn. This type of retirement account allows individuals to make contributions both as an employer and as an employee, providing higher contribution limits than many other individual-based retirement plans. Unlike other 401(k) plans, individual 401(k)s are not subject to annual filings with the IRS unless the account balance exceeds $250,000.
What plan works best for your and your employees depends on your business and your and your employees' needs. If you're interested in opening a 401(k) plan for your small Belleville, IL business, schedule an appointment with a member of our team today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Your Belleville, IL Small Business With Your 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Belleville, IL 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 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 handful of detailed Google 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 create 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 operating a plan — There are numerous requirements you must follow when beginning your small business 401(k). You must:
- 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 oversee the operation and yearly reviews of your 401(k).
- Advertising your 401(k) plan to potential employees — The phrase "401(k)" might appear on a job listing in a list of benefits, but many in the job market don't fully understand what a 401(k) entails. We can connect the phrase "401(k)" to specific 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 provide market insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best position employees' money for further growth.
- Employee education — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we can speak directly to your small business's employees so they're confident 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 stiff fees. 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 duty to act in the best interest of plan participants. We are morally and legally obligated to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor can provide remarkable value to Belleville, IL 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 Establish a 401(k) For Your Small Business in Belleville, IL
If you own a small business in Belleville, IL, you want to focus on what you do best and what you're passionate about – not being bogged down 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 Belleville, IL business today, call Correct Capital at 314-930-401(k) or contact us online.