401(k) for small business in Clayton, MO. Setting up a 401(k) plan for your small business in Clayton, MO provides numerous benefits to both you and the people that work for you, helping businesses offer more security and benefits to prospective employees. Beyond just attracting great employees, offering 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 involved in establishing and operating an account, as well as the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Clayton, MO financial planners and retirement consultants help companies of all sizes offer customized and successful 401(k) plans. We do most of the work for you, so you can spend your energy on growing your business while we focus on growing your and your employees' savings. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to get started with setting up a 401(k) for your small business in Clayton, MO.
Do I Need a 401(k) For My Clayton, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Clayton, MO has numerous benefits, for you, your employees, and your business's bottom line:
- recruit and retain top talent — Offering retirement plans can be a valuable asset for recruiting and keeping top talent, particularly if many Clayton, MO companies are advertising for the same position. Some employees will even quit their job over a 401(k), and offering one can help differentiate your business from competitors, especially if they are offered to people beyond the highest ranking employees.
- 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 yearly corporate tax deduction limit on employer contributions, as defined in section 404 of the Internal Revenue Code. There are also several tax credits when companies first establish a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their taxable income and their contributions grow tax free.
- Increased employee retirement savings — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to a more productive workforce.
- Reduced liability — Employers assume a fiduciary duty to their employees when they offer retirement plans, which involves a a deep level of investment comprehension and responsibilities. If you work 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 administer your small business 401(k) plan, they'll handle the vast majority of employee education, compliance, and administrative responsibilities on your behalf, 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 easily 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 Clayton, 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 size:
In any 401(k) plan, employees can put savings into the account through money taken out of their paychecks. Most 401(k)s have a diversity of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must meet strict nondiscrimination requirements, and are subject to yearly tests to ensure the plan doesn't favor highly compensated employees. The IRS sets contribution limits each year; in 2023 the limit 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.
Clayton, 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 when your employees pay taxes on their contributions. 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 money the employee's already paid taxes on, meaning the money grows tax-free and there are no taxes when the money's withdrawn, as 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 reduce tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer 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 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 have a percentage of their pay contributed to the plan unless they decide not to. The default contribution rate starts at 3% and increases by 1% every year until it maxes out at 6%, unless the employee elects 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
Solo and Individual 401(k) plans are intended for owner-only businesses, or a business where the only employee is a spouse. Contributions are tax deductible and gains grow tax-deferred until 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 is more than $250,000.
The "best" plan for your will depend on your business and employees. If you're interested in setting up a 401(k) plan for your small Clayton, MO business, make an appointment with one of our advisers today to get started.
How a Financial Advisor Can Help Small Clayton, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Clayton, MO employers might still be uneasy, 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 a financial advisor can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A handful of detailed Google searches are a poor replacement for years of experience and working on retirement plans every day. Financial advisors can partner with small business owners to design 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.
- Initiating and managing a plan — There are specific steps you must take 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 prospective employees — The term "401(k)" might show up on a job ad 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 specific 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 offer market 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 — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we can talk 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 penalties. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary responsibility to act in the best interest of plan participants. We are ethically 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 Clayton, MO small business owners who are looking to set up 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 Clayton, MO
If you own a small business in Clayton, MO, you want to spend your time on why you started your business – not being bogged down by retirement plan responsibilities 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 Clayton, MO business today, call Correct Capital at 314-930-401(k) or contact us online.