401(k) for small business in Frontenac, MO. Creating a 401(k) plan for your small business in Frontenac, MO provides various benefits to both employers and employees, 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. However, some business owners might not be confident they want to proceed because of the time commitment, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Frontenac, 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, 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 fill out our online form to learn more about creating a 401(k) for your small business in Frontenac, MO.
Benefits of Setting Up a 401(k) for Your Small Frontenac, MO Business
Establishing and operating a 401(k) for a small business in Frontenac, MO can do wonders for you, your workers, and your business goals alike:
- Attract and retain top employees — Providing retirement plans is an important asset for recruiting and retaining top talent, particularly if many Frontenac, 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 earners.
- 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 yearly corporate tax deduction limit on employer contributions, as stipulated in section 404 of the Internal Revenue Code. There are also several tax credits when businesses first set up a 401(k) plan, and if the employer offers automatic enrollment. Employees can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — 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.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they provide 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 majority of that liability will be passed onto them.
- Simple 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 enjoy the rewards of offering a plan without much nuisance. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new job elsewhere, 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 Frontenac, 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:
In any 401(k) plan, employees can put funds into the account through payroll deductions. Most 401(k)s have many different investment opportunities. Employers can employers can deposit an equal amount as their employees as an added perk to employees. Most 401(k) plans must meet strict nondiscrimination requirements, and are subject to yearly tests to ensure they remain compliant. The IRS mandates contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Frontenac, MO businesses 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 the contributions are made 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 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 an employer you would be required to make contributions that are fully vested when made. 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 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 decide not to. The default contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 6%, unless the employee elects 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
These are are meant for owner-only businesses, 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 do not require 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 interested in setting up a 401(k) plan for your small Frontenac, MO business, schedule an appointment with one of our advisers today to get started.
How a Financial Advisor Can Help Small Frontenac, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Frontenac, MO employers might still be wary, as they may not have the knowledge, 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 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 design a 401(k) plan meant expressly to benefit their business. 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 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 do all of that for you, and manage the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The word "401(k)" might appear on a job ad as a bullet point, but many in the job market don't fully understand what a 401(k) entails. We can connect the words "401(k)" to concrete 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 well versed in portfolio management will be able to provide investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to best 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 can speak directly to your small business's employees so they're confident with the status of their retirement savings.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following them can lead to stiff fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally break with the regulations.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interest of plan participants. We are morally 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 Frontenac, 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 provide a valuable benefit to their employees while also managing risk and ensuring the plan’s long-term success.
Call Correct Capital to Establish a 401(k) For Your Small Business in Frontenac, MO
If you own a small business in Frontenac, MO, you want to focus 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 Frontenac, MO business today, call Correct Capital at 314-930-401(k) or contact us online.