401(k) for small business in Creve Coeur, MO. Initiating a 401(k) plan for your small business in Creve Coeur, MO provides 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, offering a 401(k) plan also provides numerous tax benefits for both employers and employees. But, some business owners may still be wary because of the time commitment, as well as the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Creve Coeur, MO financial advisors and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We do the financial and administrative work for you while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to get started with establishing a 401(k) for your small business in Creve Coeur, MO.
Should I Establish a 401(k) For My Creve Coeur, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Creve Coeur, MO has numerous benefits, for employers, your workers, and your business goals alike:
- Attract and keep great employees — Providing a 401(k) plan is an essential asset for attracting and retaining accomplished talent, especially in a competitive Creve Coeur, MO job market. 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 earners.
- 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 to the extent that the contributions are not more than the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. The federal government also offers tax credits when businesses 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 financial security for employees — A 401(k) plan allows employees to feel better about how they'll spend their golden years. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers owe a fiduciary responsibility to their employees when they offer retirement plans, which involves a wide range of investment savvy and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to initiate and operate your small business's 401(k), the majority of that fiduciary duty will go to them.
- Ease of administration — When you parter with a 3(16) administrator to establish your small business 401(k) plan, they'll manage the critical tasks of employee education, compliance, and administrative responsibilities for you, so you can benefit from 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 a new retirement account without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Creve Coeur, 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 funds into the account through payroll deductions. Most 401(k)s have a wide range of investment options. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and are subject to yearly tests to ensure they remain compliant. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case you can contribute an additional $7,500 as a catch-up contribution.
Creve Coeur, MO companies with multiple employees have a few different considerations to make when setting up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — Contributions made with a traditional deferral are taxed at different times 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. 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 been contributing for at least 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 decide to set up a Safe Harbor 401(k), as a business owner you would be obligated to make contributions that are fully vested when made. 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, regardless of whether 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 have a portion of their pay contributed to the plan unless they choose to opt out or contribute a different amount. The automatic contribution rate starts at 3% and increases by 1% annually 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
Solo and Individual 401(k) plans are are meant 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 save more as they can make contributions both as a worker and an employer. Unlike other 401(k) plans, individual 401(k)s do not require annual filings with the IRS unless the account balance surpasses $250,000.
What plan works best for your and your employees depends on your business and employees. If you're considering establishing a 401(k) plan for your small Creve Coeur, MO business, schedule an appointment with a member of our team today to get started.
How a Financial Advisor Can Help Your Creve Coeur, MO Small Business With Your 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Creve Coeur, MO employers might still be wary, as managing a 401(k) plan is complex and time-consuming. That’s where a financial advisor can help. Here are some ways that a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A handful of quick internet searches can't come close to offering the same degree of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to develop a 401(k) plan meant expressly to benefit them. 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 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
- Develop 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 yearly reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The word "401(k)" might show up on a job listing in a list of benefits, but many in the job market don't fully understand what a 401(k) entails. We can connect the phrase "401(k)" to concrete steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in portfolio management will be able to offer market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally 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 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 — 401(k) plans have different rules and contribution limits. 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 responsibility — 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 savings.
A financial advisor offers considerable value to Creve Coeur, MO small business owners who want to experience the benefits of a 401(k) plan. By working 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 Start a 401(k) For Your Small Business in Creve Coeur, MO
If you own a small business in Creve Coeur, 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 Creve Coeur, MO business today, call Correct Capital at 314-930-401(k) or contact us online.