401(k) for small business in Crestwood, MO. Establishing a 401(k) plan for your small business in Crestwood, MO can offer various 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, providing a 401(k) plan can also help both businesses and employees lower their tax liability. However, some business owners may still be wary because of the time commitment, as well as the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Crestwood, MO financial planners and retirement consultants work with companies large and small to offer 401(k) plans that fit their business and provide stability for their employees. We take the heavy financial lifting off your plate, so you can focus on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-401(k) or fill out our online form to get started with establishing a 401(k) for your small business in Crestwood, MO.
Do I Need a 401(k) For My Crestwood, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Crestwood, MO can do wonders for you, your employees, and your business's bottom line:
- Attract and keep top talent — Offering a 401(k) plan can be an essential asset for recruiting and keeping top talent, especially in a competitive Crestwood, MO job market. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax benefits — Both businesses and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not exceed the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. The federal government also offers tax credits when companies first establish a 401(k) plan, and if the employer offers automatic enrollment. Employees can benefit from tax-deferred contributions and potentially reduce their taxable income.
- 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 a more productive workforce.
- Decreased liability — Employers take on a fiduciary duty to their employees when they offer 401(k) plans, which involves a wide range of investment understanding and obligations. If you work with an ERISA 3(38) Fiduciary advisor to initiate and manage 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 handle the vast majority of employee education, compliance, and administrative responsibilities on your behalf, so you can reap the rewards of offering a plan without much nuisance. In addition, advisors can help with 401(k) payroll integration 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 much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Crestwood, MO?
Depending on what industry you're in, 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:
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 abide by rigid 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 you can deposit an additional $7,500 as a catch-up contribution.
Crestwood, MO employers with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The main difference between traditional and Roth deferrals is when your employees pay taxes on their contributions. 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 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 increasingly popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be required to make fully vested contributions to your employees' accounts. 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 automatic contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 6%, unless the employee decides on a different contribution rate.
Because you are required to make contributions, your business would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are intended for owner-only businesses, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and savings grow tax-deferred until the money is taken out. This allows participants to save more as they can make contributions both as an employee 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 employees. If you're interested in setting up a 401(k) plan for your small Crestwood, MO business, schedule a meeting with one of our advisers today to find out more about the benefits and options available to you.
How a Financial Advisor Can Help Your Crestwood, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Crestwood, MO employers might still be uneasy, 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 few detailed Google searches are a poor replacement for decades of experience and everyday interaction with retirement plans. Financial advisors can work 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 plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and managing a plan — There are numerous requirements you must follow when establishing 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 assist with all of the above requirements, and handle the operation and annual reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The phrase "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 bridge the words "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 qualified to perform portfolio management will be able to provide 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 — 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 certain regulations when offering a 401(k) plan. 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 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 bound 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 Crestwood, 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 Start a 401(k) For Your Small Business in Crestwood, MO
If you own a small business in Crestwood, MO, you want to focus on why you started your business – 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 Crestwood, MO business today, call Correct Capital at 314-930-401(k) or contact us online.