401 (k) for small business in Huntleigh, MO. Setting up a 401(k) plan for your small business in Huntleigh, MO provides various benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. In addition to offering more benefits than competitors, offering a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners may still be wary because of the time commitment, as well as the complex web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Huntleigh, MO financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We take the heavy financial lifting off your plate while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to get started with setting up a 401(k) for your small business in Huntleigh, MO.
Benefits of Setting Up a 401(k) for Your Small Huntleigh, MO Business
Establishing and maintaining a 401(k) for a small business in Huntleigh, MO has numerous benefits, for you, your workers, and your business's bottom line:
- Attract and retain great employees — Providing retirement plans is an important tool for attracting and retaining top talent, particularly if many Huntleigh, MO companies are hiring for the same position. 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 benefits — Both employers and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions employers make are tax deductible up to the annual corporate tax deduction limit on employer contributions, as defined 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. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased employee retirement savings — A retirement account allows employees to feel more confident about how they'll live in retirement. Greater financial security eventually leads to more productivity.
- Decreased liability — Employers assume a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a wide range of investment knowledge and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to initiate and operate your small business's 401(k), most of that liability will go to them.
- Simple administration — When you parter with a 3(16) administrator to establish your small business 401(k) plan, they'll take care of the lion's share of employee education, compliance, and administrative tasks for you, so you can benefit from 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 takes a new job elsewhere, they can easily perform a 401(k) rollover to an IRA or new 401(k) without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Huntleigh, MO?
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. However many employees you have, there is a 401(k) plan that will work for you:
In any 401(k) plan, employees can put savings into the account through money taken out of their paychecks. Most 401(k)s have a wide range of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must adhere to strict nondiscrimination requirements, and are subject to annual tests to ensure the plan doesn't favor highly compensated employees. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Huntleigh, MO companies with multiple employees have a few different things to think about when setting 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 money is deposited before taxes are taken out, and the employee can then deduct the amount deposited from their 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 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 a business owner you would be required 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, regardless of whether 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 money is taken out of their paycheck unless they decide not to. The automatic contribution rate starts at 3% and increases by 1% every year until it reaches a maximum of 6%, unless the employee decides on 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 a business where the only employee is a spouse. Contributions are tax deductible and earnings grow tax-deferred until the money is taken out. This allows participants to save more as they can make contributions both as a worker and an employer. 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 your and your employees' needs. If you're interested in 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
Even considering the great things a 401(k) plan can do for a small business, some Huntleigh, MO employers may still be wary, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some ways that a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A few detailed Google searches are a poor replacement for decades of experience and everyday interaction with retirement plans. Financial advisors can work with small business owners to design 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.
- Setting up and operating a plan — There are specific steps you must take when establishing 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 assist with all of the above requirements, and oversee 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 listing in a list of benefits, but many in the job market don't know the full benefits a plan provides. We can bridge the words "401(k)" to definite steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are qualified to perform 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' money 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 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 stiff penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally break with the regulations.
- Fiduciary duty — 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 bound to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor offers remarkable value to Huntleigh, MO small business owners who are looking to establish a 401(k) plan. By partnering 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 Start a 401(k) For Your Small Business in Huntleigh, MO
If you own a small business in Huntleigh, MO, you want to focus 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.