401(k) for small business in Cottleville, MO. Setting up a 401(k) plan for your small business in Cottleville, MO can offer various benefits to both employers and employees, helping businesses offer more security and benefits to prospective 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 might not be confident they want to move forward because of the time involved in setting up and operating a plan, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Cottleville, MO financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do most of the work for you while you focus on your business. Speak to a Correct Capital team member today at 314-930-401(k) or complete our online form to get started with establishing a 401(k) for your small business in Cottleville, MO.
Should I Establish a 401(k) For My Cottleville, MO Small Business?
Establishing and operating a 401(k) for a small business in Cottleville, MO can do wonders for you, your employees, and your business goals alike:
- Attract and retain great talent — Offering retirement plans can be an essential tool for attracting and keeping top talent, particularly in a competitive Cottleville, MO job market. 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 benefits — Both businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not surpass 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 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 ultimately leads to more productivity.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they provide retirement plans, which involves a wide range of investment knowledge and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), the bulk of that liability will be placed on them.
- Simple administration — When you parter with a 3(16) administrator to establish your small business 401(k) plan, they'll manage the vast majority of employee education, compliance, and administrative duties on your behalf, so you can enjoy 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 job elsewhere, they can easily rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Cottleville, 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 funds into the account through money taken out of their paychecks. Most 401(k)s offer many different investments that may include mutual funds, index funds, bonds, and company stock. Employers can employers can deposit an equal amount as their employees as an added perk to employees. Most 401(k) plans must meet strict nondiscrimination requirements, and are subject to annual tests to ensure the plan doesn't favor highly compensated employees. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Cottleville, 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 — Contributions made with a traditional deferral are taxed differently than with a Roth deferral. 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 there are no taxes when the money's withdrawn, so 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 increasingly popular as they allow employees to diversify their tax exposure 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 fully vested contributions to your employees' plans. 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, regardless of whether 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 default 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 mandatory employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are are meant for owner-only businesses, 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 allows participants to save more 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 your and your employees' needs. If you're interested in opening a 401(k) plan for your small Cottleville, MO business, schedule a meeting with a member of our advisor team today to get started.
How a Financial Advisor Can Help Small Cottleville, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Cottleville, 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 we come in. Here are some some of the many ways that a financial advisor can assist with 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 licensed advisory firm. 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 most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing a plan — There are numerous requirements you must follow 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 manage the operation and yearly reviews of the plan.
- Marketing your 401(k) plan to prospective employees — The word "401(k)" might show up on a job ad in a list of benefits, but many in the job market don't fully understand what a 401(k) entails. We can bridge the phrase "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 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 feel at ease with how their money is being held and invested.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to harsh 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 duty to act in the best interest of plan participants. 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 can provide considerable value to Cottleville, 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 Start a 401(k) For Your Small Business in Cottleville, MO
If you own a small business in Cottleville, MO, you want to spend your time on why you started your business – 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 Cottleville, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
