401 (k) for small business in Crestwood, MO. Creating a 401(k) plan for your small business in Crestwood, 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 offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners may still be wary because of the time involved in establishing and maintaining a plan, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Crestwood, MO financial advisors and retirement consultants help companies of all sizes offer 401(k) plans that fit their business and provide stability for their employees. We do the financial and administrative work for you, so you can spend your energy on growing your business while we focus on growing your and your employees' retirement accounts. Call Correct Capital today at 314-930-401(k) or contact us online to learn more about establishing a 401(k) for your small business in Crestwood, MO.
Should I Establish a 401(k) For My Crestwood, MO Small Business?
Setting up and operating a 401(k) for a small business in Crestwood, MO has numerous benefits, for employers, your employees, and your business goals alike:
- recruit and retain great talent — Providing a 401(k) plan can be a valuable asset for recruiting and keeping top talent, especially if many Crestwood, MO companies are hiring for the same job. 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 deductions — Both businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions from employers are tax deductible up to the yearly corporate tax deduction limit on employer contributions, as laid out in section 404 of the Internal Revenue Code. The federal government also offers tax credits when businesses first establish a 401(k) plan, and if the employer offers automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — A retirement account allows employees to feel more confident about how they'll live in retirement. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they provide retirement plans, which involves a a deep level of investment savvy 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 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 take care of the critical tasks of employee education, compliance, and administrative responsibilities on your behalf, so you can enjoy the rewards of offering a plan without putting in too much work yourself. Moreover, 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 an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Crestwood, MO?
Depending on your industry, your "small business" may have up to 1,500 employees, or it may just be yourself. 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 offer a diversity of investment opportunities. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must adhere to strict nondiscrimination requirements, and perform annual tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS mandates 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.
Crestwood, 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 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 the money is deposited 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 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 decide to set up a Safe Harbor 401(k), as an employer 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 chooses 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 automatic contribution rate starts at 3% and increases by 1% annually 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 people who are self-employed, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and the money is taxed when it's withdrawn. This allows participants to make higher contributions as they can make contributions both as an employee and an employer. 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.
What plan works best for your and your employees depends on your business and employees. If you're thinking of setting up a 401(k) plan for your small Crestwood, MO business, make an appointment with a member of our advisor team today to get started.
How a Financial Advisor Can Help Your Crestwood, MO Small Business With Your 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Crestwood, MO employers might still be wary, as they may not have the knowledge, time, or interest to establish and operate a plan. That’s where we come in. Here are some ways that our advisory firm 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 decades of experience and everyday interaction with retirement plans. Financial advisors can partner with small business owners to design a 401(k) plan meant expressly to benefit their company. 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 beginning your small business 401(k). You must:
- 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 do all of that for you, and manage the operation and yearly reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The word "401(k)" might appear 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 connect the phrase "401(k)" to specific 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' funds 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 good about with the status of their retirement savings.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to harsh fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interest of plan participants. We are morally and legally required 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 are looking to establish 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 Crestwood, MO
If you own a small business in Crestwood, MO, you want to spend your time on what you do best and what you're passionate about – not being bogged down by administrative tasks 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.