401 (k) for small business in Clarkson Valley, MO. Creating a 401(k) plan for your small business in Clarkson Valley, MO provides numerous benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. In addition to attracting top talent, providing a 401(k) plan also offers numerous tax benefits for both employers and employees. However, some business owners might not be confident they want to proceed because of the time commitment, as well as the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Clarkson Valley, MO financial advisors and retirement consultants work with companies large and small to 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 spend your energy on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-401(k) or contact us online to get started with creating a 401(k) for your small business in Clarkson Valley, MO.
Should I Establish a 401(k) For My Clarkson Valley, MO Small Business?
Setting up and operating a 401(k) for a small business in Clarkson Valley, MO can do wonders for employers, your employees, and your business's bottom line:
- recruit and keep top employees — Offering retirement plans can be an essential asset for attracting and keeping skilled employees, particularly if many Clarkson Valley, MO companies are hiring for the same position. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if they are offered to people beyond management.
- Tax benefits — Both businesses and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible up to the yearly 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 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 spend their golden years. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a wide range of investment savvy and obligations. If you partner with an ERISA 3(38) Fiduciary provider to establish and manage your small business's 401(k), most of that liability will go to them.
- Simple administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll manage the critical tasks of employee education, compliance, and administrative responsibilities for you, so you can benefit from the rewards of offering a plan without putting in too much work yourself. 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 an IRA or new 401(k) without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in Clarkson Valley, 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:
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 a diversity of investment options. Employers can make matching contributions as an added benefit to employees. Most 401(k) plans must abide by strict nondiscrimination requirements, and perform annual tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS sets 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 employers with multiple employees have a few different things to think about when setting up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The main 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. When the money is withdrawn it is taxed as ordinary income at the employee's tax rate at the time of withdrawal.
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, as 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 more popular as they reduce tax liability 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 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 decide not to. The automatic contribution rate starts at 3% and increases by 1% every year until it reaches a maximum of 6%, unless the employee elects a different contribution rate.
In exchange for obligatory 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 owner-only businesses, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and gains grow tax-deferred until withdrawn. This allows participants to save more as they can make contributions both as an employee and a businesses owner. Unlike other 401(k) plans, individual 401(k)s do not require annual filings with the IRS unless the account balance surpasses $250,000.
What plan works best for your and your employees depends on your business and employees. If you're thinking of opening a 401(k) plan for your small Clarkson Valley, MO business, schedule a meeting with a member of our team today to learn 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 benefits of a small business offering a 401(k) plan, some Clarkson Valley, 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 some of the many ways that our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A handful of quick internet searches can't come close to offering the same degree 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.
- Setting up and operating a plan — There are numerous requirements you must adhere to when establishing 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and oversee the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might appear 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 definite steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are qualified to perform 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' money 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 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 harsh fees. 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 in the best interest of plan participants. We are ethically and legally required to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor can provide remarkable value to Clarkson Valley, MO small business owners who are looking to create 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 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 energy on what you do best and what you're passionate about – not being bogged down 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 314-930-401(k) or contact us online.
