401(k) for small business in Clarkson Valley, MO. Initiating a 401(k) plan for your small business in Clarkson Valley, MO provides various benefits to both you and the people that work for you, helping businesses offer more security and benefits to prospective employees. Beyond just 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 sure if they want to move forward because of the time commitment, in addition to the complex web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Clarkson Valley, 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 focus on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 877-930-4015 or fill out our online form to get started with establishing a 401(k) for your small business in Clarkson Valley, MO.
Benefits of Setting Up a 401(k) for Your Small Clarkson Valley, MO Business
Setting up and maintaining a 401(k) for a small business in Clarkson Valley, MO can do wonders for employers, your employees, and your business's bottom line:
- Attract and keep top talent — Offering retirement plans can be an essential tool for attracting and keeping top talent, especially if many Clarkson Valley, MO companies are hiring for the same job. One survey says 401(k) plans are the most important financial benefit to employees, and offering one can help your business stand out, especially if they are offered to people beyond the highest earners.
- Tax benefits — Both businesses and employees can reduce how much they owe in taxes 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 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 taxable income and their contributions grow tax free.
- Increased financial security for employees — A retirement account allows employees to feel better about how they'll live in retirement. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers owe a fiduciary duty to their employees when they provide 401(k) plans, which involves a a deep level of investment knowledge and obligations. If you partner with an ERISA 3(38) Fiduciary provider to set up and operate your small business's 401(k), most of that fiduciary duty will go to them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the lion's share of employee education, compliance, and administrative duties for you, so you can reap the rewards of offering a plan without much hassle. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new job elsewhere, they can effortlessly rollover their 401(k) to a new retirement account without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Clarkson Valley, MO?
Depending on your industry, 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 money taken out of their paychecks. Most 401(k)s offer many different investment options. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must follow rigid 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 the limit is $30,000.
Clarkson Valley, 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 — 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, lowering an employee's taxable income. When the money is withdrawn it is taxed as ordinary income at the plan participant's tax rate at the time of withdrawal.
With Roth deferrals, contributions are made with after-tax dollars, meaning the money grows tax-free and the savings and any gains can be withdrawn tax-free, so 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 decrease tax liability in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as a business owner you would be obligated to make contributions that are fully vested when made. 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 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 choose to opt out or contribute a different amount. The automatic contribution rate starts at 3% and increases by 1% every year until it maxes out at 6%, unless the employee chooses a different contribution rate.
In exchange for required employer contributions, Safe Harbor plans are not 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 a business where the only employee is a spouse. Contributions can be deducted from taxable income and the money is taxed when it's withdrawn. This allows participants to save more 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 exceeds $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're interested in opening a 401(k) plan for your small Clarkson Valley, MO business, schedule a meeting with a member of our advisor team today to find out more about the benefits and options available to you.
How a Financial Advisor Can Help Your Clarkson Valley, MO Small Business With Your 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Clarkson Valley, 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 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 meant expressly to benefit them. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing 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
- Establish 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 yearly reviews of the plan.
- Marketing your 401(k) plan to those in the job market — The phrase "401(k)" might appear on a job listing in a list of benefits, but many in the job market don't know the full benefits a plan provides. We can bridge the phrase "401(k)" to concrete 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 well versed in portfolio management will be able to offer market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' funds 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 they're confident with how their money is being held and invested.
- Compliance — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to stiff 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 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 Clarkson Valley, 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 Establish a 401(k) For Your Small Business in Clarkson Valley, MO
If you own a small business in Clarkson Valley, 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 Clarkson Valley, MO business today, call Correct Capital at 877-930-4015 or contact us online.
