401(k) for small business in Crestwood, MO. Initiating 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 people in the job market. In addition to offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. However, some business owners may still be cautious because of the time commitment, in addition to the complex web of regulations, laws, and investment opportunities 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 what their business needs and what their employees want. We do the financial and administrative work for you while you focus on your business. Call Correct Capital today at 877-930-4015 or complete our online form to learn more about setting up a 401(k) for your small business in Crestwood, MO.
Benefits of Setting Up a 401(k) for Your Small Crestwood, MO Business
Setting up and operating a 401(k) for a small business in Crestwood, MO has numerous benefits, for you, your workers, and your business's bottom line:
- Attract and retain great employees — Offering retirement plans can be an essential asset for recruiting and keeping top talent, particularly if many Crestwood, MO companies are hiring for the same position. One survey says 401(k) plans are the most important financial benefit to employees, and offering one can help your business stand out, especially if they are offered to people beyond the highest ranking employees.
- Tax deductions — 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. The federal government also offers tax credits for first-time 401(k) plans and offering automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — A 401(k) plan allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers assume a fiduciary duty to their employees when they provide 401(k) plans, which involves a wide range of investment comprehension and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to establish and manage your small business's 401(k), the majority 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 lion's share of employee education, compliance, and administrative responsibilities on your behalf, so you can enjoy the rewards of offering a plan without much nuisance. Furthermore, advisors can help integrate contributions with your payroll system for further simplicity. If an employee takes a new job elsewhere, they can effortlessly perform a 401(k) rollover to an IRA or new 401(k) without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Crestwood, 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:
401(k) Plans
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s offer a wide range of 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 additional benefit to employees. Most 401(k) plans must meet stringent nondiscrimination requirements, and undergo yearly tests to ensure the plan doesn't favor highly compensated employees. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case you can deposit an additional $7,500 as a catch-up contribution.
Crestwood, MO companies 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 deposited from their taxable income. When the money is withdrawn it is taxed as ordinary income at the plan participant'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, so long as the plan participant has had the account for 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 plan participants to diversify their tax exposure 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 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 money is taken out of their paycheck 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.
Because you are required to make contributions, your company would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are intended for people who are self-employed, or a business where the only employee is a spouse. Contributions can be deducted from taxable income and earnings 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 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 opening a 401(k) plan for your small Crestwood, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Small Crestwood, MO Businesses With Their 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 a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A handful of quick internet searches are a poor replacement for years of experience and working on retirement plans every day. 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 plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing a plan — There are specific steps you must take when beginning 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 participant
A financial advisory firm can assist with all of the above requirements, and oversee the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The phrase "401(k)" might show up on a job ad as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. We can connect the words "401(k)" to concrete images of a more secure retirement, with very clear stepping stones on how to get there.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to provide investment insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to optimally position employees' savings 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 they're confident with the status of their retirement savings.
- Compliance — Employers must abide by various rules and contribution limits when offering a 401(k) plan. Not following them can lead to harsh fines. 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 duty to act with diligence, prudence, and care. We are morally and legally bound 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 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 save on taxes and make their business more attractive to current and potential employees.
Call Correct Capital to Establish a 401(k) For Your Small Business in Crestwood, MO
If you own a small business in Crestwood, MO, you want to spend your energy on why you started your business – not being distracted 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 Crestwood, MO business today, call Correct Capital at 877-930-4015 or contact us online.
