401(k) for small business in Imperial, MO. Setting up a 401(k) plan for your small business in Imperial, MO can offer various benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. Beyond just offering more benefits than competitors, offering 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 commitment, as well as the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Imperial, MO financial planners and retirement consultants help companies of all sizes offer customized and successful 401(k) plans. We do the financial and administrative work for you 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 learn more about establishing a 401(k) for your small business in Imperial, MO.
Should I Establish a 401(k) For My Imperial, MO Small Business?
Establishing and operating a 401(k) for a small business in Imperial, MO can do wonders for employers, your employees, and your business goals alike:
- recruit and keep top employees — Offering a 401(k) plan can be an essential asset for recruiting and retaining top talent, especially 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 earners.
- Tax benefits — Both businesses and employees can benefit from tax advantages 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. There are also several tax credits when businesses first set up a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their taxable income and their contributions grow tax free.
- Increased employee retirement savings — A 401(k) plan allows employees to feel more confident about how they'll live in retirement. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they provide 401(k) plans, which involves a a deep level of investment knowledge and responsibilities. If you work with an ERISA 3(38) Fiduciary provider to assist you with 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 administer your small business 401(k) plan, they'll handle the vast majority of employee education, compliance, and administrative responsibilities for you, 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 takes a new job elsewhere, they can easily rollover their 401(k) to an IRA or new 401(k) without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in Imperial, 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 contribute through payroll deductions. Most 401(k)s have 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 perk to employees. Most 401(k) plans must adhere to 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 turn 50 or older this year, in which case you can deposit an additional $7,500 as a catch-up contribution.
Imperial, MO companies with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The key difference between traditional and Roth deferrals is when your employees pay taxes on their contributions. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, 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 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 reduce tax liability 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 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 have a part 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% each year until it reaches a maximum of 6%, unless the employee chooses 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 people who are self-employed, or a business where the only employee is a spouse. Contributions are tax deductible and gains 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 exceeds $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're interested in opening a 401(k) plan for your small Imperial, MO business, make an appointment with one of our advisers today to find out 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 great things a 401(k) plan can do for a small business, some Imperial, MO employers might still be uneasy, as managing a 401(k) plan is complex and time-consuming. 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 few quick internet searches are a poor replacement for decades of experience and working on retirement plans every day. Financial advisors can work with small business owners to design a 401(k) plan meant specifically 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 operating a plan — There are specific steps you must take when beginning 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 participant
A financial advisory firm can assist with all of the above requirements, and handle the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to potential employees — The phrase "401(k)" might appear 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 specific 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 offer market insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best position employees' funds for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will help them. 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 how their money is being held and invested.
- Compliance — Employers must adhere to various rules and contribution limits when offering a 401(k) plan. Not following them can lead to harsh fees. A financial advisor can help to ensure all of the proper rules are followed.
- 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 obligated to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor offers significant value to Imperial, MO small business owners who want to experience the benefits of a 401(k) plan. By consulting 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 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.