401(k) for small business in Chesterfield, MO. Initiating a 401(k) plan for your small business in Chesterfield, MO can offer various benefits to both you and the people that work for you, 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 confident they want to move forward because of the time commitment, in addition to the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Chesterfield, MO financial planners and retirement consultants work with companies large and small to offer customized and successful 401(k) plans. We do most of the work for you, so you can focus on growing your business while we focus on growing your and your employees' savings. Speak to a Correct Capital team member today at 877-930-4015 or contact us online to learn more about establishing a 401(k) for your small business in Chesterfield, MO.
Do I Need a 401(k) For My Chesterfield, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Chesterfield, MO has numerous benefits, for employers, your workers, and your business goals alike:
- recruit and keep top employees — Providing retirement plans can be an essential tool for attracting and keeping top talent, especially if many Chesterfield, MO companies are hiring for the same position. 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 you offer 401(k)s to rank-and-file employees as well.
- 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, which is 25% of covered payroll. The federal government also offers tax credits when businesses first establish a 401(k) plan, and if the employer offers automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — A 401(k) plan allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security ultimately leads to more productivity.
- Reduced liability — Employers owe a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a wide range of investment comprehension and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to set up and manage your small business's 401(k), much of that liability will be passed onto them.
- Simple 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 on your behalf, so you can reap the rewards of offering a plan without much hassle. In addition, advisors can help integrate contributions with your payroll system for further simplicity. If an employee takes a new job elsewhere, they can easily rollover their 401(k) to an IRA or new 401(k) without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in Chesterfield, 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 size:
401(k) Plans
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s have a wide range of investment options. Employers can employers can deposit an equal amount as their employees as an added perk to employees. Most 401(k) plans must adhere to strict nondiscrimination requirements, and perform 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 turn 50 or older this year, in which case you can contribute an additional $7,500 as a catch-up contribution.
Chesterfield, 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 — 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 it is pre-tax money, and the employee can then deduct the amount contributed 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 plan participants to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner you would be required to make contributions that are fully vested when made. To meet Safe Harbor requirements, you have four possible ways to 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 money is taken out of their paycheck unless they decide not to. The default contribution rate starts at 3% and increases by 1% annually until it reaches a maximum of 6%, unless the employee decides on a different contribution rate.
In exchange for mandatory employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are intended for owner-only businesses, 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 do not require 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 Chesterfield, MO business, make an appointment with one of our advisers today to find out more about the benefits and options available to you.
How a Financial Advisor Can Help Small Chesterfield, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Chesterfield, 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 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 work 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 right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and managing a plan — There are specific steps you must take 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and manage the operation and annual reviews of the plan.
- Advertising 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 fully understand what a 401(k) can do for them. We can connect the words "401(k)" to specific images of a more secure retirement, with very clear stepping stones on 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 best position employees' money for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will help them. At Correct Capital, we can speak directly to your small business's employees so feel good about with the status of their retirement savings.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following them can lead to stiff fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are morally and legally obligated to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers significant value to Chesterfield, 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 Chesterfield, MO
If you own a small business in Chesterfield, 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 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 Chesterfield, MO business today, call Correct Capital at 877-930-4015 or contact us online.
