401 (k) for small business in Central West End, MO. Initiating a 401(k) plan for your small business in Central West End, MO provides numerous benefits to both employers and employees, helping businesses offer more security and benefits to prospective employees. In addition to attracting top talent, 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 involved in setting up and maintaining an account, as well as the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Central West End, MO financial advisors and retirement consultants help companies of all sizes offer 401(k) plans that fit what their business needs and what their employees want. We take the heavy financial lifting off your plate, so you can focus on growing your business while we focus on growing your and your employees' retirement accounts. Call Correct Capital today at 314-930-401(k) or contact us online to learn more about establishing a 401(k) for your small business in Central West End, MO.
Benefits of Setting Up a 401(k) for Your Small Central West End, MO Business
Establishing and maintaining a 401(k) for a small business in Central West End, MO has numerous benefits, for you, your workers, and your business's bottom line:
- recruit and keep top employees — Offering a 401(k) plan is a valuable asset for recruiting and retaining top talent, particularly in a competitive Central West End, MO job market. Employees see a 401(k) as a valuable benefit, 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 businesses and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible up to the annual corporate tax deduction limit on employer contributions, as laid out 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 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.
- Decreased liability — Employers assume a fiduciary responsibility to their employees when they provide retirement plans, which involves a wide range of investment understanding and obligations. If you work with an ERISA 3(38) Fiduciary advisor to initiate and manage your small business's 401(k), the majority of that fiduciary duty will go to them.
- Ease of administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll manage the lion's share of employee education, compliance, and administrative responsibilities on your behalf, so you can enjoy the rewards of offering a plan without much hassle. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can easily 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 Central West End, 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 how many employees they have:
In any 401(k) plan, employees can put funds into the account through money taken out of their paychecks. Most 401(k)s have a wide range of investment options. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must abide by stringent nondiscrimination requirements, and perform yearly tests to ensure the plan doesn't favor highly compensated employees. The IRS mandates contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case you can deposit an additional $7,500 as a catch-up contribution.
Central West End, 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 — 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 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, 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 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. 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 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 part 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 elects 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 are meant 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 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.
The "best" plan for your will depend on your business and employees. If you're thinking of establishing a 401(k) plan for your small Central West End, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Your Central West End, MO Small Business With Your 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Central West End, MO employers might still be wary, 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 some of the many 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 providing the same degree of skill and experience as a licensed advisory firm. Financial advisors can partner with small business owners to design a 401(k) plan that meets the specific needs of their business and employees. 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 adhere to when initiating 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 handle the operation and annual reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The word "401(k)" might show up on a job listing as a bullet point, but many in the job market don't know the full benefits a plan provides. We can connect 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 well versed in portfolio management will be able to offer investment 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 good about with the status of their retirement savings.
- 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 — As a plan sponsor, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are ethically and legally required 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 Central West End, 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 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 Central West End, MO
If you own a small business in Central West End, MO, you want to spend your energy on why you started your business – 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 Central West End, MO business today, call Correct Capital at 314-930-401(k) or contact us online.