401 (k) for small business in Fairview Heights, IL. Establishing a 401(k) plan for your small business in Fairview Heights, IL can offer numerous benefits to both you and the people that work for you, helping businesses offer more security and benefits to prospective employees. 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 laws.
At Correct Capital Wealth Management, our Fairview Heights, IL financial advisors and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We do the financial and administrative work for you, so you can spend your energy on growing your business while we focus on growing your and your employees' retirement accounts. 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 Fairview Heights, IL.
Should I Establish a 401(k) For My Fairview Heights, IL Small Business?
Establishing and maintaining a 401(k) for a small business in Fairview Heights, IL has numerous benefits, for you, your employees, and your business's bottom line:
- Attract and retain top talent — Providing retirement plans is an important asset for recruiting and retaining high-performing employees, especially in a competitive Fairview Heights, IL job market. 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 you offer 401(k)s to rank-and-file employees as well.
- Tax benefits — Both businesses and employees can reduce their tax liability 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. 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 401(k) plan allows employees to feel more confident about how they'll spend their golden years. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers assume a fiduciary responsibility to their employees when they provide 401(k) plans, which involves a wide range of investment comprehension and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to set up and manage your small business's 401(k), much of that liability will be passed onto them.
- Ease of administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll take care of the lion's share of employee education, compliance, and administrative responsibilities for you, so you can benefit from the rewards of offering a plan without much hassle. Moreover, advisors can help integrate contributions with your payroll system for further simplicity. If an employee takes a new job elsewhere, they can effortlessly perform a 401(k) rollover to an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Fairview Heights, IL?
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:
In any 401(k) plan, employees can put funds into the account through money taken out of their paychecks. Most 401(k)s have a wide range of investment options. Employers can make matching contributions as an added benefit to employees. Most 401(k) plans must abide by rigid nondiscrimination requirements, and are subject to annual tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS sets 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.
Fairview Heights, IL 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 key 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. Taxes are paid when the money is withdrawn.
With Roth deferrals, contributions are made with after-tax dollars, meaning the money grows tax-free and the savings and any gains can be withdrawn tax-free, so long as the plan participant has been contributing for at least five years and is 59-½ years old when the withdrawal is made. Roth 401(k)s are becoming increasingly popular as they reduce tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer 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 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 have a portion of their pay contributed to the plan 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 reaches a maximum of 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
These are intended for owner-only businesses, or a business where the only employee is a spouse. Contributions can be deducted from taxable income and gains grow tax-deferred until 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.
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, make an appointment with one of our advisers today to get started.
How a Financial Advisor Can Help Your Fairview Heights, IL Small Business With Your 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Fairview Heights, IL employers may still be uneasy, as they may not have the know-how, time, or interest to establish and operate a plan. That’s where we come in. 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 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 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.
- Establishing 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 participant
A financial advisory firm can do all of that for you, and manage the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might show up on a job ad as a bullet point, but many in the job market don't know the full benefits a plan provides. We can bridge the phrase "401(k)" to specific 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 provide investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' funds 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 — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to stiff fees. 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 required to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor can provide significant 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 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 Fairview Heights, IL business today, call Correct Capital at 314-930-401(k) or contact us online.