401(k) for small business in Des Peres, MO. Setting up a 401(k) plan for your small business in Des Peres, MO can offer various benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. Beyond just attracting great employees, providing a 401(k) plan can also help both businesses and employees lower their tax liability. But, some business owners might not be confident they want to move forward because of the time involved in setting up and maintaining an account, as well as the complex web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Des Peres, MO financial planners and retirement consultants help companies of all sizes 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 contact us online to get started with setting up a 401(k) for your small business in Des Peres, MO.
Why You Should Up a 401(k) for Your Small Des Peres, MO Business
Setting up and maintaining a 401(k) for a small business in Des Peres, MO has numerous benefits, for you, your workers, and your business's bottom line:
- Attract and keep top employees — Offering a 401(k) plan is an essential asset for recruiting and retaining accomplished workers, especially in a competitive Des Peres, MO job market. 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 benefits — Both businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make 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 set up a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their taxable income and their contributions grow tax free.
- Increased employee retirement savings — A retirement account allows employees to feel more confident about how they'll spend their golden years. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers owe a fiduciary responsibility to their employees when they provide 401(k) plans, which involves a a deep level of investment savvy and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), the majority 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 handle the lion's share of employee education, compliance, and administrative duties on your behalf, so you can reap 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 moves to a new company, they can simply rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Des Peres, 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 how many employees they have:
401(k) Plans
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s have 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 additional perk to employees. Most 401(k) plans must follow stringent nondiscrimination requirements, and undergo yearly tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case you can contribute an additional $7,500 as a catch-up contribution.
Des Peres, 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 it is pre-tax money, 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, so long as the plan participant has had the account for five years and is 59-½ years old when the withdrawal is made. Roth 401(k)s are becoming more popular as they allow employees to diversify their tax exposure 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 fully vested contributions to your employees' accounts. To meet Safe Harbor requirements, you have four options:
- 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 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 maxes out at 6%, unless the employee elects 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 owner-only businesses, or a business where the only employee is a spouse. 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 a worker and a businesses owner. 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 your and your employees' needs. If you're interested in setting up a 401(k) plan for your small Des Peres, MO business, schedule a meeting with one of our advisers today to discover more about the benefits and options available to you.
How a Financial Advisor Can Help Your Des Peres, MO Small Business With Your 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Des Peres, 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 some of the many ways that our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A few quick internet searches can't come close to providing the same level of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to develop a 401(k) plan meant specifically to benefit their business. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing a plan — There are numerous requirements you must adhere to when beginning 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 oversee the operation and annual reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might appear 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 a clear road map of how to get there.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in portfolio management will be able to provide market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally 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 how their money is being held and invested.
- 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 duty — As a plan sponsor, small business owners have a fiduciary duty to act in the best interest of plan participants. We are ethically and legally required to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers significant value to Des Peres, 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 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 Des Peres, MO
If you own a small business in Des Peres, 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 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 Des Peres, MO business today, call Correct Capital at 877-930-4015 or contact us online.
