401(k) for small business in Huntleigh, MO. Initiating a 401(k) plan for your small business in Huntleigh, MO provides numerous benefits to both employers and employees, helping businesses offer more security and benefits to prospective employees. Beyond just offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners may still be cautious because of the time commitment, as well as the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Huntleigh, MO financial advisors and retirement consultants work with companies large and small to offer 401(k) plans that fit what their business needs and what their employees want. We take the heavy financial lifting off your plate, so you can spend your energy on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-401(k) or complete our online form to learn more about creating a 401(k) for your small business in Huntleigh, MO.
Should I Establish a 401(k) For My Huntleigh, MO Small Business?
Setting up and operating a 401(k) for a small business in Huntleigh, MO has numerous benefits, for employers, your employees, and your business's bottom line:
- Attract and keep top talent — Providing retirement plans can be an important asset for recruiting and keeping top talent, particularly in a competitive Huntleigh, MO job market. 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 you offer 401(k)s to rank-and-file employees as well.
- Tax benefits — Both employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not exceed 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 when employers 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 employee retirement savings — A retirement account allows employees to feel better about how they'll spend their golden years. Greater financial security ultimately leads to more productivity.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they provide retirement plans, which involves a a deep level of investment savvy 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 go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the lion's share of employee education, compliance, and administrative tasks for you, so you can reap the rewards of offering a plan without putting in too much work yourself. Moreover, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, they can simply perform a 401(k) rollover to a new retirement account without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Huntleigh, 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:
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s offer a wide range of investments that may include mutual funds, index funds, bonds, and company stock. Employers can employers can deposit an equal amount as their employees as an added benefit to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and undergo annual tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case you can deposit an additional $7,500 as a catch-up contribution.
Huntleigh, MO businesses 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 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 more popular as they allow employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be obligated to make fully vested contributions to your employees' plans. 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, whether or not the employee chooses 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 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 elects a different contribution rate.
In exchange for mandatory employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are are meant for owner-only businesses, or businesses where the only employees are spouses. Contributions are tax deductible 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 surpasses $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're thinking of establishing a 401(k) plan for your small Huntleigh, MO business, make an appointment with a member of our team today to find out more about the benefits and options available to you.
How a Financial Advisor Can Help Small Huntleigh, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Huntleigh, MO employers may still be cautious, as they may not have the knowledge, time, or interest to establish and operate a plan. 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 few quick internet searches can't come close to providing the same degree of skill and experience as a licensed advisory firm. Financial advisors can work 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 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
- Develop a record keeping system
- Provide plan information to participant
A financial advisory firm can assist with all of the above requirements, and manage the operation and annual reviews of the plan.
- Advertising your 401(k) plan to potential employees — The word "401(k)" might appear on a job ad in a list of benefits, but many in the job market don't fully understand what a 401(k) entails. We can bridge the words "401(k)" to specific 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 offer market 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 — 401(k) plans have different rules and contribution limits. Not following them can lead to stiff fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- Fiduciary duty — When offering a retirement plan, small business owners have a fiduciary responsibility 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 funds.
A financial advisor offers considerable value to Huntleigh, 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 Start a 401(k) For Your Small Business in Huntleigh, MO
If you own a small business in Huntleigh, MO, you want to spend your energy on what you do best and what you're passionate about – 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 Huntleigh, MO business today, call Correct Capital at 314-930-401(k) or contact us online.