401 (k) for small business in Eureka, MO. Establishing a 401(k) plan for your small business in Eureka, MO can offer various benefits to both you and the people that work for you, helping businesses offer more security and benefits to people in the job market. Beyond just attracting top talent, offering a 401(k) plan can also help both businesses and employees reduce their tax liability. However, some business owners might not be confident they want to move forward because of the time commitment, in addition to the complex web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Eureka, MO financial advisors 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 focus on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-401(k) or contact us online to get started with establishing a 401(k) for your small business in Eureka, MO.
Why You Should Up a 401(k) for Your Small Eureka, MO Business
Establishing and maintaining a 401(k) for a small business in Eureka, MO has numerous benefits, for you, your employees, and your business's bottom line:
- Attract and keep great employees — Offering a 401(k) plan is an important asset for attracting and retaining top talent, especially in a competitive Eureka, MO job market. Employees see a 401(k) as a valuable benefit, and offering one can help differentiate your business from competitors, especially if they are offered to people beyond management.
- 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 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 set up 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 employee retirement savings — A retirement account allows employees to feel more confident about how they'll spend their golden years. Greater financial security eventually leads to a more productive workforce.
- Reduced liability — Employers take on a fiduciary duty to their employees when they offer 401(k) plans, which involves a a deep level of investment comprehension and obligations. If you work with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), the bulk 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 take care of 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 putting in too much work yourself. Furthermore, 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 a new retirement account without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Eureka, 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 size:
401(k) Plans
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s have 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 benefit to employees. Most 401(k) plans must follow rigid nondiscrimination requirements, and perform yearly tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case you can contribute an additional $7,500 as a catch-up contribution.
Eureka, MO businesses 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 the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, lowering an employee's 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 the savings and any gains can be withdrawn tax-free, so long as the plan participant has had the account for five years and is 59-½ years old when the money is taken out. Roth 401(k)s are becoming more popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner you would be obligated to make fully vested contributions to your employees' accounts. To meet Safe Harbor requirements, you have four options:
- 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 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% annually until it reaches a maximum of 6%, unless the employee decides on 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 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 is more than $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 Eureka, MO business, make an appointment with a member of our advisor team today to get started.
How a Financial Advisor Can Help Small Eureka, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Eureka, 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 detailed Google searches are a poor replacement for years of experience and everyday interaction with retirement plans. Financial advisors can work with small business owners to design a 401(k) plan meant expressly to benefit their company. They can help choose the plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and managing 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 do all of that for you, and handle the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might appear 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 term "401(k)" to specific 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 offer investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' savings for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will benefit them. At Correct Capital, we can speak directly to your small business's employees so feel good about 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 fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary responsibility — As a plan sponsor, 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 significant value to Eureka, MO small business owners who want to experience the benefits of a 401(k) plan. By partnering 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 Eureka, MO
If you own a small business in Eureka, MO, you want to spend your time on why you started your business – not being bogged down by retirement plan responsibilities 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 Eureka, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
