401(k) for small business in Des Peres, MO. Establishing a 401(k) plan for your small business in Des Peres, MO can offer numerous benefits to both you and the people that work for you, helping businesses stand out and provide long-term financial security to their employees. Beyond just offering more benefits than competitors, providing a 401(k) plan also provides 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 establishing and operating an account, as well as the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Des Peres, MO financial planners and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We take the heavy financial lifting off your plate, so you can spend your energy on growing your business while we focus on growing your and your employees' savings. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to learn more about creating a 401(k) for your small business in Des Peres, MO.
Should I Establish a 401(k) For My Des Peres, MO Small Business?
Setting up and maintaining a 401(k) for a small business in Des Peres, MO has numerous benefits, for employers, your workers, and your business's bottom line:
- Attract and retain top talent — Offering a 401(k) plan can be an important tool for recruiting and keeping top talent, especially if many Des Peres, MO companies are advertising for the same position. Some employees will even quit their job over a 401(k), and offering one can help differentiate your business from competitors, especially if they are offered to people beyond management.
- Tax benefits — Both employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions are not more than the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. 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 employee retirement savings — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to more productivity.
- Decreased liability — Employers assume a fiduciary duty to their employees when they provide retirement plans, which involves a wide range of investment comprehension and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), most of that liability will go to them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the vast majority of employee education, compliance, and administrative responsibilities for you, so you can enjoy the rewards of offering a plan without putting in too much work yourself. In addition, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can effortlessly 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:
In any 401(k) plan, employees can put funds into the account through money taken out of their paychecks. Most 401(k)s offer many different investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an added benefit 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 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.
Des Peres, MO businesses with multiple employees have a few different considerations to make 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, and the employee can then deduct the amount deposited from their taxable income. Taxes are paid when the money is withdrawn.
With Roth deferrals, contributions are made with after-tax dollars, meaning the money grows tax-free and there are no taxes when the money's withdrawn, so long as the plan participant has been contributing for at least five years and is 59-½ years old when the money is taken out. 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 an employer you would be required 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 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 automatic 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.
Because you are required to make contributions, your business would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are intended for owner-only businesses, or a business where the only employee is a spouse. Contributions are tax deductible and earnings grow tax-deferred until the money is taken out. This allows participants to make higher contributions as they can make contributions both as an employee 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 surpasses $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 establishing 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 benefits of a small business offering a 401(k) plan, some Des Peres, MO employers might still be wary, as managing a 401(k) plan is complex and time-consuming. 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 handful of detailed Google searches can't come close to offering the same level of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to design 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.
- Establishing and operating a plan — There are numerous requirements you must adhere to 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and oversee the operation and annual reviews of the plan.
- Marketing your 401(k) plan to those in the job market — The term "401(k)" might show up 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 connect the words "401(k)" to definite 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 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 can speak directly to your small business's employees so they're confident with how their money is being held and invested.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to stiff fees. 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 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 can provide remarkable value to Des Peres, MO small business owners who are looking to establish a 401(k) plan. By consulting 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 focus on why you started your business – 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 Des Peres, MO business today, call Correct Capital at 314-930-401(k) or contact us online.