401(k) for small business in Edwardsville, IL. Establishing a 401(k) plan for your small business in Edwardsville, IL provides various benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. In addition to offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees lower their tax liability. However, some business owners might not be sure if 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 Edwardsville, IL financial planners and retirement consultants help companies of all sizes offer customized and successful 401(k) plans. We take the heavy financial lifting off your plate, so you can focus on growing your business while we focus on growing your and your employees' retirement accounts. Speak to a Correct Capital team member today at 877-930-4015 or complete our online form to learn more about establishing a 401(k) for your small business in Edwardsville, IL.
Do I Need a 401(k) For My Edwardsville, IL Small Business?
Setting up and operating a 401(k) for a small business in Edwardsville, IL can do wonders for employers, your employees, and your business goals alike:
- recruit and retain great employees — Offering retirement plans is a valuable asset for attracting and retaining high-performing employees, especially in a competitive Edwardsville, IL job market. 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 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, which is 25% of covered payroll. The federal government also offers 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 financial security for employees — A retirement account allows employees to feel better about how they'll spend their golden years. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers assume a fiduciary duty to their employees when they offer 401(k) plans, which involves a a deep level of investment knowledge and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), much of that liability will be placed on 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 critical tasks of employee education, compliance, and administrative tasks for you, so you can reap 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 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 For Your Small Business in Edwardsville, IL
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 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 make matching contributions as an additional perk to employees. Most 401(k) plans must follow strict nondiscrimination requirements, and are subject to yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Edwardsville, IL companies with multiple employees have a few different things to think about when setting 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, lowering an employee's 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, as 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 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, whether or not 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 have a part of their pay contributed to the plan unless they decide not to. The automatic contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 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
These are are meant 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.
The "best" plan for your will depend on your business and employees. If you're thinking of establishing a 401(k) plan for your small Edwardsville, IL 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 Small Edwardsville, IL Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Edwardsville, IL employers may 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 our advisory firm can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few quick internet searches are a poor replacement for years of experience and everyday interaction with retirement plans. 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 plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and operating a plan — There are numerous requirements you must follow 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 manage the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The phrase "401(k)" might show up on a job listing in a list of benefits, but many in the job market don't fully understand what a 401(k) entails. We can bridge the phrase "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 concepts 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 they're confident with how their money is being held and invested.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following them can lead to harsh penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- 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 bound to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor offers remarkable value to Edwardsville, IL small business owners who are looking to set up 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 Set Up a 401(k) For Your Small Business in Edwardsville, IL
If you own a small business in Edwardsville, IL, you want to focus on what you do best and what you're passionate about – 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 Edwardsville, IL business today, call Correct Capital at 877-930-4015 or contact us online.
