401 (k) for small business in Dardenne Prairie, MO. Setting up a 401(k) plan for your small business in Dardenne Prairie, MO can offer various benefits to both employers and employees, helping businesses stand out and provide long-term financial security to their employees. Beyond just offering more benefits than competitors, offering a 401(k) plan also affords numerous tax benefits for both employers and employees. But, some business owners might not be sure if they want to proceed because of the time involved in setting up and operating a plan, in addition to the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Dardenne Prairie, MO financial advisors and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We take the heavy financial lifting off your plate while you focus on your business. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to learn more about establishing a 401(k) for your small business in Dardenne Prairie, MO.
Do I Need a 401(k) For My Dardenne Prairie, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Dardenne Prairie, MO can do wonders for employers, your workers, and your business goals alike:
- Attract and keep great talent — Offering a 401(k) plan is an essential tool for attracting and keeping high-performing workers, especially in a competitive Dardenne Prairie, 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 management.
- Tax benefits — Both businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions employers make are tax deductible up to the yearly corporate tax deduction limit on employer contributions, as stipulated in section 404 of the Internal Revenue Code. There are also several tax credits for first-time 401(k) plans and offering automatic enrollment. Employees can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — A 401(k) plan 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 assume a fiduciary responsibility to their employees when they offer retirement plans, which involves a wide range of investment savvy and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to establish and operate your small business's 401(k), much of that fiduciary duty will go to them.
- Simple administration — When you parter with a 3(16) administrator to establish your small business 401(k) plan, they'll take care of the lion's share of employee education, compliance, and administrative responsibilities for you, so you can enjoy the rewards of offering a plan without much hassle. Moreover, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, they can effortlessly rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
Types of 401(k) Plans That Can Help Your Small Business in Dardenne Prairie, 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 contribute through money taken out of their paychecks. Most 401(k)s have a wide range of investment opportunities. Employers can employers can deposit an equal amount as their employees as an additional perk to employees. Most 401(k) plans must abide by stringent nondiscrimination requirements, and are subject to annual tests to ensure they remain compliant. The IRS mandates contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case you can contribute an additional $7,500 as a catch-up contribution.
Dardenne Prairie, MO businesses with multiple employees have a few different options in how they set 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 increasingly popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as an employer you would be obligated 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, regardless of whether 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 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% each year until it reaches a maximum of 6%, unless the employee chooses 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 type of retirement account allows individuals to make contributions both as an employer and as an employee, providing higher contribution limits than many other individual-based retirement plans. 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.
What plan works best for your and your employees depends on your business and your and your employees' needs. If you're interested in opening a 401(k) plan for your small Dardenne Prairie, MO business, schedule a meeting with a member of our team today to find out more about the benefits and options available to you.
How a Financial Advisor Can Help Small Dardenne Prairie, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Dardenne Prairie, MO employers might still be wary, 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 level of skill and experience as a professional retirement consultant. 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 right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and operating a plan — There are specific steps you must take when initiating 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 oversee the operation and annual reviews of the plan.
- Advertising your 401(k) plan to potential employees — The term "401(k)" might appear on a job listing as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. We can bridge the term "401(k)" to definite 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 market 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 — The more an employee understands their 401(k) plan, the more it will benefit them. 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 — 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 your recordkeeper and plan administrator do not accidentally break with the regulations.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interest of their employees. 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 can provide remarkable value to Dardenne Prairie, 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 Set Up a 401(k) For Your Small Business in Dardenne Prairie, MO
If you own a small business in Dardenne Prairie, MO, you want to spend your energy on why you started your business – not being distracted 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 Dardenne Prairie, MO business today, call Correct Capital at 314-930-401(k) or contact us online.