401(k) for small business in Brentwood, MO. Creating a 401(k) plan for your small business in Brentwood, MO provides various benefits to both employers and employees, helping businesses offer more security and benefits to prospective employees. Beyond just attracting top talent, offering a 401(k) plan also affords numerous tax benefits for both employers and employees. However, some business owners may still be wary because of the time commitment, as well as the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Brentwood, MO financial advisors 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 do the financial and administrative work for you, so you can focus on growing your business while we focus on growing your and your employees' retirement accounts. Speak to a Correct Capital team member today at 877-930-4015 or fill out our online form to learn more about establishing a 401(k) for your small business in Brentwood, MO.
Should I Establish a 401(k) For My Brentwood, MO Small Business?
Establishing and operating a 401(k) for a small business in Brentwood, MO can do wonders for employers, your employees, and your business's bottom line:
- recruit and retain top talent — Providing a 401(k) plan can be a valuable asset for recruiting and keeping top talent, particularly in a competitive Brentwood, MO job market. One survey says 401(k) plans are the most important financial benefit to employees, and offering one can help differentiate your business from competitors, especially if they are offered to people beyond the highest ranking employees.
- 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 up to the annual corporate tax deduction limit on employer contributions, as stipulated in section 404 of the Internal Revenue Code. There are also several tax credits for first-time 401(k) plans and offering automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased financial security for employees — A 401(k) plan allows employees to feel better about how they'll spend their golden years. Greater financial security ultimately leads to a more productive workforce.
- Decreased liability — Employers owe a fiduciary responsibility to their employees when they provide retirement plans, which involves a wide range of investment comprehension and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to initiate and manage your small business's 401(k), most 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 take care of the vast majority of employee education, compliance, and administrative duties for you, so you can benefit from 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 job elsewhere, they can easily rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
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Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
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Types of 401(k) Plans That Can Help Your Small Business in Brentwood, 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:
401(k) Plans
In any 401(k) plan, employees can put funds into the account through money taken out of their paychecks. Most 401(k)s have many different investment opportunities. Employers can make matching contributions as an added perk to employees. Most 401(k) plans must follow strict nondiscrimination requirements, and undergo yearly tests to ensure they remain compliant. The IRS mandates contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Brentwood, MO employers with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The key difference between traditional and Roth deferrals is when your employees pay taxes on their contributions. With a traditional deferral, contributions are tax-deferred, meaning the contributions are made 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 required to make fully vested contributions to your employees' accounts. 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 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 decide not to. The automatic contribution rate starts at 3% and increases by 1% annually until it maxes out at 6%, unless the employee chooses 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
These are intended for people who are self-employed, or businesses where the only employees are spouses. Contributions are tax deductible and the money is taxed when it's withdrawn. This allows participants to make higher contributions as they can make contributions both as a worker and a businesses owner. 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 employees. If you're thinking of opening a 401(k) plan for your small Brentwood, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Small Brentwood, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Brentwood, MO employers might still be cautious, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some ways that our advisory firm can assist with 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 professional retirement consultant. Financial advisors can work with small business owners to create 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 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
- Establish 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 your 401(k).
- Marketing your 401(k) plan to those in the job market — The word "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 connect the term "401(k)" to specific steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in portfolio management will be able to offer investment insight, as well as work within investment concepts 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 they're confident with how their money is being held and invested.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to stiff fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary duty to act with diligence, prudence, and care. 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 consulting with a financial advisor, small business owners can save on taxes and make their business more attractive to current and prospective employees.
Call Correct Capital to Establish a 401(k) For Your Small Business in Brentwood, MO
If you own a small business in Brentwood, MO, you want to spend your time on what you do best and what you're passionate about – not being distracted by retirement plan responsibilities you may not have the time, knowledge, or interest to manage. 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 877-930-4015 or contact us online.
