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 numerous benefits to both you and the people that work for you, helping businesses offer more security and benefits to prospective employees. In addition to offering more benefits than competitors, offering a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners might not be confident they want to proceed because of the time commitment, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Des Peres, MO financial planners and retirement consultants work with companies large and small to 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. 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 can do wonders for employers, your employees, and your business goals alike:
- recruit and keep great talent — Providing a 401(k) plan can be a valuable tool for attracting and keeping skilled workers, particularly if many Des Peres, MO companies are hiring for the same position. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax benefits — 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 defined 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 employee retirement savings — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they provide 401(k) plans, which involves a wide range of investment comprehension 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 handle the lion's share of employee education, compliance, and administrative responsibilities on your behalf, so you can benefit from 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 job elsewhere, they can simply perform a 401(k) rollover to a new retirement account without you having to do much work.
Types of 401(k) Plans For Your Small Business in Des Peres, MO
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. However many employees you have, there is a 401(k) plan that will work for you:
401(k) Plans
In any 401(k) plan, employees can contribute through payroll deductions. Most 401(k)s offer a wide range of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must meet strict 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 turn 50 or older this year, in which case you can deposit an additional $7,500 as a catch-up contribution.
Des Peres, MO employers with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The main difference between traditional and Roth deferrals is when your employees pay taxes on their contributions. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, and the employee can then deduct the amount contributed from their 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 allow employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner 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, regardless of whether the employee chooses 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 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 company would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are are meant for owner-only businesses, or businesses where the only employees are spouses. Contributions are tax deductible 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 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 thinking of opening a 401(k) plan for your small Des Peres, MO business, make an appointment with one of our advisers today to get started.
How a Financial Advisor Can Help Your Des Peres, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Des Peres, MO employers might still be cautious, as they may not have the know-how, time, or interest to establish and operate a plan. 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 handful of quick internet searches can't come close to providing the same degree of skill and experience as a licensed advisory firm. Financial advisors can partner 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 managing a plan — There are specific steps you must take when beginning 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and handle the operation and yearly reviews of the plan.
- Marketing 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) entails. We can bridge the term "401(k)" to definite 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 qualified to perform portfolio management will be able to offer investment insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best position employees' savings 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 talk directly to your small business's employees so feel at ease with how their money is being held and invested.
- Compliance — Employers must adhere to various rules and contribution limits when offering a 401(k) plan. Not following them can lead to stiff fees. 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 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 can provide remarkable value to Des Peres, MO small business owners who are looking to establish 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 prospective employees.
Call Correct Capital to Establish 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 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 Des Peres, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
