401 (k) for small business in Imperial, MO. Initiating a 401(k) plan for your small business in Imperial, MO provides numerous benefits to both employers and employees, helping businesses offer more security and benefits to prospective employees. In addition to offering more benefits than competitors, providing a 401(k) plan also affords numerous tax benefits for both employers and employees. However, some business owners may still be wary because of the time involved in establishing and maintaining an account, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Imperial, MO 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 focus on growing your business while we focus on growing your and your employees' retirement accounts. Call Correct Capital today at 314-930-401(k) or contact us online to get started with setting up a 401(k) for your small business in Imperial, MO.
Benefits of Setting Up a 401(k) for Your Small Imperial, MO Business
Setting up and maintaining a 401(k) for a small business in Imperial, MO has numerous benefits, for employers, your workers, and your business's bottom line:
- Attract and retain great employees — Offering a 401(k) plan can be a valuable asset for attracting and retaining high-performing workers, particularly if many Imperial, MO companies are hiring for the same job. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if they are offered to people beyond the highest ranking employees.
- Tax deductions — Both employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers 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 when employers first establish a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- 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 take on a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a a deep level of investment savvy and obligations. If you work with an ERISA 3(38) Fiduciary provider to initiate and operate your small business's 401(k), the bulk of that liability will go to them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the vast majority of employee education, compliance, and administrative tasks on your behalf, 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 moves to a new job elsewhere, they can effortlessly rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Imperial, MO?
Depending on what industry you're in, your "small business" may have up to 1,500 employees, or it may just be yourself. However many employees you have, there is a 401(k) plan that will work for you:
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 wide range of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must meet rigid nondiscrimination requirements, and undergo yearly tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case you can contribute an additional $7,500 as a catch-up contribution.
Imperial, MO businesses 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 contributions are made before taxes are taken out, lowering an employee's taxable income. When the money is withdrawn it is taxed as ordinary income at the employee's tax rate at the time of withdrawal.
With Roth deferrals, contributions are made with after-tax dollars, meaning the money grows tax-free and there are no taxes when the money's withdrawn, 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 reduce tax liability 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' accounts. 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 default contribution rate starts at 3% and increases by 1% every year 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 can be deducted from taxable income and the money is taxed when it's withdrawn. This allows participants to save more as they can make contributions both as an employee 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.
What plan works best for your and your employees depends on your business and employees. If you're interested in establishing a 401(k) plan for your small Imperial, MO business, schedule an appointment with one of our advisers today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Small Imperial, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Imperial, MO employers may still be cautious, as managing a 401(k) plan is complex and time-consuming. That’s where a financial advisor can help. Here are some some of the many ways that a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A handful of detailed Google searches can't come close to offering the same degree of skill and experience as a professional retirement consultant. 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 works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and operating a plan — There are numerous requirements you must follow when beginning 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 handle the operation and yearly reviews of the plan.
- Marketing your 401(k) plan to those in the job market — The word "401(k)" might show up on a job listing as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. We can bridge the phrase "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 concepts 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 feel at ease 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 your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interest of their employees. We are morally and legally bound to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor offers remarkable value to Imperial, 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 Set Up a 401(k) For Your Small Business in Imperial, MO
If you own a small business in Imperial, MO, you want to spend your energy on what you do best and what you're passionate about – 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 Imperial, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
