401(k) for small business in Eureka, MO. Initiating a 401(k) plan for your small business in Eureka, MO provides numerous benefits to both you and the people that work for you, helping businesses offer more security and benefits to people in the job market. In addition to attracting great employees, 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 involved in establishing and operating an account, as well as the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Eureka, MO financial advisors and retirement consultants help companies of all sizes 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 877-930-4015 or contact us online to get started with creating a 401(k) for your small business in Eureka, MO.
Do I Need a 401(k) For My Eureka, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Eureka, MO can do wonders for employers, your employees, and your business goals alike:
- Attract and keep top employees — Offering retirement plans is an important asset for attracting and keeping accomplished employees, particularly if many Eureka, MO companies are advertising 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 they are offered to people beyond management.
- Tax benefits — Both employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not surpass the annual corporate tax deduction limit on employer contributions, as stipulated in section 404 of the Internal Revenue Code. The federal government also offers tax credits when employers first set up a 401(k) plan, and if the employer offers 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 live in retirement. Greater financial security ultimately leads to a more productive workforce.
- Decreased liability — Employers take on a fiduciary duty to their employees when they provide 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 initiate and manage your small business's 401(k), much of that liability will be placed on them.
- Simple administration — When you parter with a 3(16) administrator to establish your small business 401(k) plan, they'll handle the critical tasks of employee education, compliance, and administrative responsibilities for you, so you can reap 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 takes a new job elsewhere, they can effortlessly rollover their 401(k) to an IRA or new 401(k) without much hassle to you.
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Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
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Types of 401(k) Plans That Can Help Your Small Business in Eureka, 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 have a wide range of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an added benefit to employees. Most 401(k) plans must follow rigid nondiscrimination requirements, and perform 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 the limit is $30,000.
Eureka, MO companies with multiple employees have a few different considerations to make when setting up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — Contributions made with a traditional deferral are taxed at different times than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, lowering an employee's 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, 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 more popular as they reduce tax liability 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' 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 portion 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 maxes out at 6%, unless the employee chooses 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 businesses where the only employees are spouses. Contributions are tax deductible 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 thinking of establishing a 401(k) plan for your small Eureka, MO business, make an appointment with a member of our advisor team today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Your Eureka, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Eureka, MO employers might still be uneasy, as managing a 401(k) plan is complex and time-consuming. That’s where a financial advisor can help. Here are some ways that a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A few 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 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.
- 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 participant
A financial advisory firm can do all of that for you, and handle the operation and yearly reviews of your 401(k).
- Marketing 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 connect the term "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 qualified to perform 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 they're confident with the status of their retirement savings.
- Compliance — Employers must abide by various rules and contribution limits when offering a 401(k) plan. Not following them can lead to stiff penalties. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are ethically and legally bound to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor can provide considerable 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 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 Eureka, MO
If you own a small business in Eureka, 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 Eureka, MO business today, call Correct Capital at 877-930-4015 or contact us online.
