401(k) for small business in Fairview Heights, IL. Initiating a 401(k) plan for your small business in Fairview Heights, IL can offer numerous benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. Beyond just attracting great employees, offering a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners might not be sure if they want to proceed because of the time commitment, as well as the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Fairview Heights, IL financial planners and retirement consultants help companies of all sizes offer 401(k) plans that fit what their business needs and what their employees want. We do most of the work for you while you focus on your business. Speak to a Correct Capital team member today at 877-930-4015 or contact us online to get started with establishing a 401(k) for your small business in Fairview Heights, IL.
Why You Should Up a 401(k) for Your Small Fairview Heights, IL Business
Setting up and maintaining a 401(k) for a small business in Fairview Heights, IL has numerous benefits, for employers, your employees, and your business goals alike:
- Attract and keep top employees — Providing retirement plans can be an essential tool for attracting and keeping top talent, particularly if many Fairview Heights, IL companies are hiring for the same job. 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 the highest earners.
- Tax deductions — Both employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible up to the annual corporate tax deduction limit on employer contributions, as laid out in section 404 of the Internal Revenue Code. There are also several tax credits for first-time 401(k) plans and offering automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased employee retirement savings — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers owe a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a a deep level of investment savvy and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), most of that liability will go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll handle the vast majority of employee education, compliance, and administrative duties on your behalf, so you can enjoy the rewards of offering a plan without putting in too much work yourself. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can easily rollover their 401(k) to a new retirement account without much hassle to you.
Types of 401(k) Plans For Your Small Business in Fairview Heights, IL
Depending on what industry you're in, your "small business" may have up to 1,500 employees, or it may just be yourself. 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 put funds into the account through payroll deductions. Most 401(k)s have a diversity of investment options. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must follow stringent nondiscrimination requirements, and undergo annual tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case you can deposit an additional $7,500 as a catch-up contribution.
Fairview Heights, IL employers with multiple employees have a few different considerations to make when setting 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. 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 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 reduce tax liability in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as an employer you would be required to make fully vested contributions to your employees' accounts. 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 contribute to the plan.
- 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 default 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.
In exchange for obligatory employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are are meant for owner-only businesses, 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 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 considering setting up a 401(k) plan for your small Fairview Heights, IL business, schedule a meeting with a member of our advisor team today to get started.
How a Financial Advisor Can Help Small Fairview Heights, IL Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Fairview Heights, IL 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 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 are a poor replacement for years of experience and working on retirement plans every day. Financial advisors can partner with small business owners to develop 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.
- Establishing and operating a plan — There are numerous requirements you must adhere to when establishing your small business 401(k). You must:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Develop a record keeping system
- Provide plan information to participant
A financial advisory firm can do all of that for you, and manage the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to potential employees — The phrase "401(k)" might show up on a job listing as a bullet point, but many in the job market don't know the full benefits a plan provides. We can connect the words "401(k)" to definite images of a more secure retirement, with a clear road map of 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 market insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best position employees' savings 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 how their money is being held and invested.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to harsh penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are ethically and legally required 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 Fairview Heights, IL small business owners who want to experience the benefits of 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 Fairview Heights, IL
If you own a small business in Fairview Heights, IL, 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 Fairview Heights, IL business today, call Correct Capital at 877-930-4015 or contact us online.
