401(k) for small business in Brentwood, MO. Initiating a 401(k) plan for your small business in Brentwood, MO can offer various benefits to both you and the people that work for you, helping businesses offer more security and benefits to people in the job market. Beyond just attracting great employees, providing a 401(k) plan also provides numerous tax benefits for both employers and employees. But, some business owners may still be cautious because of the time commitment, as well as the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Brentwood, MO financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do most of the work for you while you focus on your business. Call Correct Capital today at 314-930-401(k) or fill out our online form to learn more about setting up a 401(k) for your small business in Brentwood, MO.
Do I Need a 401(k) For My Brentwood, MO Small Business?
Setting up and maintaining a 401(k) for a small business in Brentwood, MO has numerous benefits, for you, your workers, and your business goals alike:
- recruit and keep great talent — Providing retirement plans can be a valuable tool for attracting and keeping accomplished employees, especially in a competitive Brentwood, MO job market. Some employees will even quit their job over a 401(k), and offering one can help differentiate your business from competitors, especially if they are offered to people beyond management.
- Tax deductions — Both employers 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 do not exceed 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 when companies 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 employee retirement savings — A retirement account allows employees to feel better about how they'll spend their golden years. Greater financial security eventually leads to a more productive workforce.
- Reduced liability — Employers take on a fiduciary duty to their employees when they offer 401(k) plans, which involves a wide range of investment savvy and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to initiate and manage your small business's 401(k), much of that fiduciary duty will go to them.
- Simple 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 nuisance. Additionally, 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 you having to do much work.
Types of 401(k) Plans For Your Small Business in Brentwood, MO
Depending on what industry you're in, your "small business" may have up to 1,500 employees, or it may just be yourself. 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 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 adhere to strict nondiscrimination requirements, and are subject to yearly tests to ensure they remain compliant. The IRS mandates 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.
Brentwood, MO 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 differently than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, 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, 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 more 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 required to make fully vested contributions to your employees' plans. 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 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 money is taken out of their paycheck unless they decide not to. The default contribution rate starts at 3% and increases by 1% every year until it maxes out at 6%, unless the employee elects a different contribution rate.
In exchange for obligatory employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are are meant for owner-only businesses, 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 is more than $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're thinking of establishing a 401(k) plan for your small Brentwood, MO business, make an appointment with one of our advisers today to get started.
How a Financial Advisor Can Help Small Brentwood, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Brentwood, 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 few detailed Google searches are a poor replacement for decades of experience and everyday interaction with retirement plans. Financial advisors can partner with small business owners to develop a 401(k) plan that meets the specific needs of their business and employees. They can help choose the plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and operating a plan — There are specific steps you must take when beginning your small business 401(k). You must:
- 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 do all of that for you, and manage the operation and annual reviews of the plan.
- Marketing your 401(k) plan to prospective employees — The word "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) entails. We can bridge the words "401(k)" to specific 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 investment insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to optimally 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 can talk directly to your small business's employees so feel good about with the status of their retirement savings.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to stiff penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interest of plan participants. We are ethically and legally bound to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor can provide remarkable value to Brentwood, 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 Brentwood, MO
If you own a small business in Brentwood, MO, you want to spend your energy on what you do best and what you're passionate about – 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 Brentwood, MO business today, call Correct Capital at 314-930-401(k) or contact us online.