401(k) for small business in Chesterfield, MO. Establishing a 401(k) plan for your small business in Chesterfield, MO can offer numerous benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. In addition to offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees lower their tax liability. 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 options available.
At Correct Capital Wealth Management, our Chesterfield, MO financial planners and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do the financial and administrative work for you, so you can spend your energy 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 creating a 401(k) for your small business in Chesterfield, MO.
Why You Should Up a 401(k) for Your Small Chesterfield, MO Business
Setting up and maintaining a 401(k) for a small business in Chesterfield, MO has numerous benefits, for employers, your employees, and your business goals alike:
- Attract and retain great talent — Providing a 401(k) plan is an essential asset for recruiting and keeping accomplished workers, especially in a competitive Chesterfield, MO job market. Employees see a 401(k) as a valuable benefit, and offering one can help your business stand out, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax benefits — Both employers 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, which is 25% of covered payroll. 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 save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers owe a fiduciary responsibility to their employees when they offer retirement plans, which involves a a deep level of investment understanding and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to establish and manage your small business's 401(k), most of that fiduciary duty will be passed onto them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage 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. In addition, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new company, 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 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. 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 savings into the account through payroll deductions. Most 401(k)s have a wide range of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must meet stringent nondiscrimination requirements, and undergo annual tests to ensure the plan doesn't discriminate in favor of 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.
Chesterfield, MO companies 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 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 the savings and any gains can be withdrawn tax-free, so long as the plan participant has had the account for five years and is 59-½ years old when the money is taken out. Roth 401(k)s are becoming more popular as they allow employees 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 fully vested contributions to your employees' plans. 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 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% each year 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 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 an employer. 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 Chesterfield, MO business, make an appointment with a member of our team today to get started.
How a Financial Advisor Can Help Your Chesterfield, MO Small Business With Your 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Chesterfield, MO employers may still be uneasy, 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 few detailed Google searches can't come close to offering the same degree of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to create 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.
- Initiating and operating a plan — There are specific steps you must take when establishing 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 eligible employees
A financial advisory firm can do all of that for you, and manage the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to prospective employees — The word "401(k)" might appear on a job listing 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 phrase "401(k)" to definite steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to provide market 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 help them. At Correct Capital, we can speak directly to your small business's employees so they're confident 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 fees. 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 duty to act in the best interest of plan participants. We are morally and legally mandated to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers considerable value to Chesterfield, 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 save on taxes and make their business more attractive to current and prospective employees.
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 energy on why you started your business – not being distracted 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 Chesterfield, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
