401(k) for small business in Eureka, MO. Initiating a 401(k) plan for your small business in Eureka, MO can offer 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 offering more benefits than competitors, offering a 401(k) plan also provides numerous tax benefits for both employers and employees. However, some business owners may still be wary because of the time commitment, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Eureka, MO financial planners and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do most of the work for you while you focus on making your business thrive. Speak to a Correct Capital team member today at 314-930-4015 or contact us online to learn more about setting up a 401(k) for your small business in Eureka, MO.
Should I Establish 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 you, your workers, and your business goals alike:
- Attract and retain top employees — Offering retirement plans is an essential tool for attracting and keeping top talent, particularly if many Eureka, 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 differentiate your business from competitors, 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 employers make 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. The federal government also offers tax credits when companies first establish a 401(k) plan, and if the employer offers automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- 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.
- Decreased liability — Employers owe a fiduciary duty to their employees when they offer 401(k) plans, which involves a wide range of investment knowledge and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to initiate and manage your small business's 401(k), most of that fiduciary duty will be placed on them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the lion's share of employee education, compliance, and administrative responsibilities on your behalf, so you can enjoy the rewards of offering a plan without much nuisance. Moreover, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new job elsewhere, they can effortlessly 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 Eureka, 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 how many employees they have:
401(k) Plans
In any 401(k) plan, employees can contribute through payroll deductions. Most 401(k)s have many different investment opportunities. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must follow stringent nondiscrimination requirements, and perform annual tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 that 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 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 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 after-tax dollars, meaning the money grows tax-free and there are no taxes when the money's withdrawn, 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 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. To meet Safe Harbor requirements, you have four possible ways to 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 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% every year 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 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 your and your employees' needs. If you're interested in establishing a 401(k) plan for your small Eureka, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Small Eureka, MO Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Eureka, MO employers might still be wary, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some ways that a financial advisor can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few detailed Google searches can't come close to offering the same level of skill and experience as a licensed advisory firm. Financial advisors can work with small business owners to develop a 401(k) plan meant expressly to benefit them. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing a plan — There are numerous requirements you must follow when initiating your small business 401(k). You must:
- 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 assist with all of the above requirements, and handle the operation and yearly reviews of the plan.
- Marketing your 401(k) plan to potential employees — The word "401(k)" might appear on a job listing as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. 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 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' funds for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will help them. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' employees so feel at ease 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 fines. A financial advisor can help to ensure all of the proper rules are followed.
- 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 mandated 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 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 Set Up a 401(k) For Your Small Business in Eureka, MO
If you own a small business in Eureka, MO, you want to focus on why you started your business – not being bogged down by administrative tasks 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 314-930-4015 or contact us online.
