401(k) for small business in Ellisville, MO. Creating a 401(k) plan for your small business in Ellisville, MO provides numerous benefits to both employers and employees, helping businesses stand out and provide long-term financial security to their employees. In addition to attracting top talent, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners may still be wary because of the time commitment, in addition to the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Ellisville, MO financial planners and retirement consultants work with companies large and small to offer 401(k) plans that fit what their business needs and what their employees want. We take the heavy financial lifting off your plate while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to learn more about establishing a 401(k) for your small business in Ellisville, MO.
Benefits of Setting Up a 401(k) for Your Small Ellisville, MO Business
Setting up and maintaining a 401(k) for a small business in Ellisville, MO has numerous benefits, for you, your employees, and your business goals alike:
- recruit and keep top talent — Providing retirement plans is a valuable tool for recruiting and keeping top talent, especially if many Ellisville, MO 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 your business stand out, especially if they are offered to people beyond the highest ranking employees.
- Tax benefits — Both businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers are tax deductible up to the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several tax credits when companies first establish a 401(k) plan, and if the employer offers automatic enrollment. Employees can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — A retirement account allows employees to feel more confident about how they'll live in retirement. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers owe a fiduciary duty to their employees when they provide 401(k) plans, which involves a wide range of investment understanding and obligations. If you partner with an ERISA 3(38) Fiduciary provider to initiate and manage your small business's 401(k), the bulk of that liability will go to them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the vast majority of employee education, compliance, and administrative duties on your behalf, so you can benefit from the rewards of offering a plan without putting in too much work yourself. Moreover, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can easily perform a 401(k) rollover to a new retirement account without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Ellisville, MO?
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. 401(k) plans are available to all businesses, regardless of size:
In any 401(k) plan, employees can put savings into the account through payroll deductions. Most 401(k)s offer 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 added perk to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and perform yearly tests to ensure they remain compliant. The IRS sets 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.
Ellisville, MO companies 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 the contributions are made before taxes are taken out, 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 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 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 increasingly 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 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, 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 automatic contribution rate starts at 3% and increases by 1% annually until it maxes out at 6%, unless the employee decides on 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 are meant for people who are self-employed, 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 do not require annual filings with the IRS unless the account balance exceeds $250,000.
What plan works best for your and your employees depends on your business and employees. If you're considering setting up a 401(k) plan for your small Ellisville, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Small Ellisville, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Ellisville, MO employers may still be cautious, 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 help make your life easier in regards to 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 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.
- Setting up 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
- Develop a record keeping system
- Provide plan information to eligible employees
A financial advisory firm can do all of that for you, and manage the operation and yearly reviews of your 401(k).
- Marketing your 401(k) plan to prospective employees — The word "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) entails. We can connect the words "401(k)" to concrete 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 well versed in portfolio management will be able to offer 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 talk directly to your small business's employees so feel at ease with the status of their retirement savings.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. 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 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 retirement accounts.
A financial advisor offers considerable value to Ellisville, MO small business owners who are looking to create 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 Establish a 401(k) For Your Small Business in Ellisville, MO
If you own a small business in Ellisville, MO, you want to spend your energy on why you started your business – not being distracted 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 Ellisville, MO business today, call Correct Capital at 314-930-401(k) or contact us online.