401(k) for small business in Clarkson Valley, MO. Creating a 401(k) plan for your small business in Clarkson Valley, MO can offer various benefits to both you and the people that work for you, helping businesses stand out and provide long-term financial security to their employees. In addition to attracting top talent, offering a 401(k) plan also offers numerous tax benefits for both employers and employees. But, some business owners may still be cautious because of the time involved in establishing and operating a plan, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Clarkson Valley, MO financial planners and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We do the financial and administrative work for you while you focus on making your business flourish. Call Correct Capital today at 314-930-401(k) or fill out our online form to get started with creating a 401(k) for your small business in Clarkson Valley, MO.
Why You Should 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 has numerous benefits, for employers, your employees, and your business goals alike:
- Attract and retain top talent — Providing a 401(k) plan is an essential tool for attracting and keeping top talent, particularly if many Clarkson Valley, MO companies are hiring for the same position. 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 employers and employees can reduce how much they owe in taxes 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. The federal government also offers 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 more confident about how they'll live in retirement. Greater financial security ultimately leads to more productivity.
- Reduced liability — Employers assume a fiduciary duty to their employees when they offer 401(k) plans, which involves a wide range of investment savvy and responsibilities. If you work with an ERISA 3(38) Fiduciary provider to establish and manage your small business's 401(k), much of that liability will go to them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the lion's share of employee education, compliance, and administrative tasks on your behalf, so you can reap the rewards of offering a plan without putting in too much work yourself. Moreover, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can effortlessly rollover their 401(k) to a new retirement account without much hassle to you.
Types of 401(k) Plans For Your Small Business in Clarkson Valley, 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 put funds into the account through payroll deductions. 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 benefit to employees. Most 401(k) plans must abide by strict nondiscrimination requirements, and are subject to yearly tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case the limit is $30,000.
Clarkson Valley, MO businesses 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 the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited 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 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 had the account for 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 opt for this provision, as a business owner you would be obligated 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 decides 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 portion 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 reaches a maximum of 6%, unless the employee elects 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 intended for people who are self-employed, or a business where the only employee is a spouse. Contributions are tax deductible and gains grow tax-deferred until the money is taken out. 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 is more than $250,000.
What plan works best for your and your employees depends on your business and employees. If you're interested in setting up a 401(k) plan for your small Clarkson Valley, MO business, schedule an appointment 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 Small Clarkson Valley, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Clarkson Valley, MO employers may still be wary, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some some of the many 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 providing the same degree of skill and experience as a licensed advisory firm. Financial advisors can work 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 right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing a plan — There are numerous requirements you must follow when initiating 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 participant
A financial advisory firm can do all of that for you, and oversee the operation and annual reviews of the plan.
- Marketing your 401(k) plan to those in the job market — The term "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 definite steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in portfolio management will be able to provide market insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to optimally position employees' funds for further growth.
- Employee education — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' employees so feel at ease with the status of their retirement savings.
- Compliance — Employers must adhere to various rules and contribution limits when offering a 401(k) plan. Not following the rules correctly can lead to stiff fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally break with the regulations.
- Fiduciary duty — When offering a retirement plan, small business owners have a fiduciary duty 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 savings.
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 Set Up a 401(k) For Your Small Business in Clarkson Valley, MO
If you own a small business in Clarkson Valley, MO, you want to focus on what you do best and what you're passionate about – not being bogged down by administrative tasks 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 Clarkson Valley, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
