401(k) for small business in Fenton, MO. Establishing a 401(k) plan for your small business in Fenton, MO can offer various benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. In addition to 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 Fenton, 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 do the financial and administrative work for you while you focus on your business. 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 Fenton, MO.
Should I Establish a 401(k) For My Fenton, MO Small Business?
Establishing and operating a 401(k) for a small business in Fenton, MO has numerous benefits, for you, your workers, and your business's bottom line:
- recruit and retain top talent — Offering retirement plans is an essential tool for attracting and retaining top talent, especially in a competitive Fenton, MO job market. Employees see a 401(k) as a valuable benefit, and offering one can help your business stand out, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax deductions — Both employers and employees can benefit from tax advantages 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. The federal government also offers tax credits for first-time 401(k) plans and offering 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 save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers owe a fiduciary duty to their employees when they offer retirement plans, which involves a wide range of investment understanding and obligations. If you work with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), the bulk of that fiduciary duty will go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the critical tasks of employee education, compliance, and administrative responsibilities on your behalf, so you can enjoy the rewards of offering a plan without putting in too much work yourself. In addition, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can simply rollover their 401(k) to an IRA or new 401(k) without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Fenton, MO?
Depending on what industry you're in, 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 how many employees they have:
401(k) Plans
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 diversity of investment options. Employers can employers can deposit an equal amount as their employees as an additional perk to employees. Most 401(k) plans must follow stringent nondiscrimination requirements, and undergo yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Fenton, MO employers with multiple employees have a few different things to think about when setting up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The main 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 money is deposited before taxes are taken out, lowering an employee's 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, 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 decrease tax liability 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 fully vested contributions to your employees' plans. 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 have a percentage 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 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 a business where the only employee is a spouse. Contributions are tax deductible and the money is taxed when it's withdrawn. This allows participants to save more as they can make contributions both as a worker and a businesses owner. 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 opening a 401(k) plan for your small Fenton, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Small Fenton, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Fenton, MO employers may still be cautious, 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 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 are a poor replacement for years of experience and everyday interaction with retirement plans. Financial advisors can partner with small business owners to design a 401(k) plan meant expressly to benefit their company. 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 follow when initiating 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 manage the operation and annual reviews of the plan.
- Marketing your 401(k) plan to those in the job market — The phrase "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 term "401(k)" to definite 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 well versed in portfolio management will be able to provide market 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 — 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 feel at ease with the status of their retirement savings.
- Compliance — Employers must adhere to certain regulations 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 duty — When offering a retirement plan, small business owners have a fiduciary duty to act in the best interest of their employees. We are ethically and legally obligated to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor offers significant value to Fenton, 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 potential employees.
Call Correct Capital to Set Up a 401(k) For Your Small Business in Fenton, MO
If you own a small business in Fenton, MO, you want to focus on what you do best and what you're passionate about – not being distracted 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 Fenton, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
