401 (k) for small business in Edwardsville, IL. Establishing a 401(k) plan for your small business in Edwardsville, IL can offer various benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. In addition to attracting top talent, providing a 401(k) plan can also help both businesses and employees lower their tax liability. But, some business owners might not be sure if they want to move forward because of the time commitment, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Edwardsville, IL financial advisors and retirement consultants help companies of all sizes offer customized and successful 401(k) plans. We do the financial and administrative work for you, so you can focus 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 fill out our online form to get started with establishing a 401(k) for your small business in Edwardsville, IL.
Why You Should Up a 401(k) for Your Small Edwardsville, IL Business
Establishing and maintaining a 401(k) for a small business in Edwardsville, IL has numerous benefits, for employers, your workers, and your business goals alike:
- recruit and keep great talent — Offering retirement plans can be an essential asset for attracting and retaining skilled talent, especially if many Edwardsville, IL companies are hiring for the same job. One survey says 401(k) plans are the most important financial benefit to employees, 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 deductions — Both employers 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 do not surpass the yearly corporate tax deduction limit on employer contributions, as laid out in section 404 of the Internal Revenue Code. There are also several tax credits for first-time 401(k) plans and offering 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 better about how they'll live in retirement. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers owe a fiduciary duty to their employees when they provide retirement plans, which involves a wide range of investment savvy and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), much of that fiduciary duty will go to them.
- Ease of administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll manage the lion's share of employee education, compliance, and administrative responsibilities on your behalf, so you can reap the rewards of offering a plan without much hassle. Moreover, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new job elsewhere, they can effortlessly rollover their 401(k) to an IRA or new 401(k) without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Edwardsville, IL?
Depending on your industry, your "small business" may have up to 1,500 employees, or it may just be yourself. However many employees you have, there is a 401(k) plan that will work for you:
In any 401(k) plan, employees can put funds into the account 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 employers can deposit an equal amount as their employees as an additional perk to employees. Most 401(k) plans must abide by strict nondiscrimination requirements, and undergo yearly tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case you can deposit an additional $7,500 as a catch-up contribution.
Edwardsville, IL 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 differently than with a Roth deferral. 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 money the employee's already paid taxes on, 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 plan participants 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 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 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 default contribution rate starts at 3% and increases by 1% each year until it maxes out at 6%, unless the employee decides on a different contribution rate.
In exchange for required 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 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 surpasses $250,000.
What plan works best for your and your employees depends on your business and employees. If you're interested in opening a 401(k) plan for your small Edwardsville, IL business, schedule an appointment with one of our advisers today to discover more about the benefits and options available to you.
How a Financial Advisor Can Help Your Edwardsville, IL Small Business With Your 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Edwardsville, IL employers may still be cautious, 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 help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A handful of quick internet searches are a poor replacement for years of experience and working on retirement plans every day. Financial advisors can work with small business owners to create a 401(k) plan that meets the specific needs of their business and employees. They can help choose the plan that most benefits you, 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 must:
- 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 do all of that for you, and handle the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to potential employees — The term "401(k)" might appear on a job listing in a list of benefits, but many in the job market don't know the full benefits a plan provides. We can connect the term "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 experienced with portfolio management will be able to offer investment 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 — 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 good about with the status of their retirement savings.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to stiff penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary duty to act in the best interest of their employees. We are ethically and legally mandated to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor offers remarkable value to Edwardsville, IL 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 Edwardsville, IL
If you own a small business in Edwardsville, IL, 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 Edwardsville, IL business today, call Correct Capital at 314-930-401(k) or contact us online.