401(k) for small business in Jefferson County, MO. Initiating a 401(k) plan for your small business in Jefferson County, MO provides various benefits to both you and the people that work for you, helping businesses stand out and provide long-term financial security to their employees. In addition to offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. However, some business owners may still be cautious because of the time involved in establishing and maintaining an account, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Jefferson County, MO financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do the financial and administrative work for you while you focus on your business. Call Correct Capital today at 877-930-4015 or contact us online to get started with creating a 401(k) for your small business in Jefferson County, MO.
Should I Establish a 401(k) For My Jefferson County, MO Small Business?
Establishing and operating a 401(k) for a small business in Jefferson County, MO has numerous benefits, for employers, your employees, and your business goals alike:
- recruit and keep top employees — Providing a 401(k) plan is an essential asset for attracting and keeping top talent, particularly if many Jefferson County, MO companies are advertising 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 their tax liability with a 401(k) plan. Matching contributions from employers 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 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 financial security for employees — A 401(k) plan allows employees to feel better about how they'll spend their golden years. Greater financial security ultimately leads to more productivity.
- Reduced liability — Employers assume a fiduciary responsibility to their employees when they provide retirement plans, which involves a a deep level of investment knowledge and obligations. If you work with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), most of that fiduciary duty will go to them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll handle the lion's share of employee education, compliance, and administrative responsibilities on your behalf, so you can enjoy 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 rollover their 401(k) to a new retirement account without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in Jefferson County, MO
Depending on your industry, 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 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 benefit to employees. Most 401(k) plans must abide by rigid nondiscrimination requirements, and perform annual 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 are 50 or older, in which case you can deposit an additional $7,500 as a catch-up contribution.
Jefferson County, 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 — Contributions made with a traditional deferral are taxed at different times than with a Roth deferral. 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, so 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 increasingly popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as an employer you would be obligated to make contributions that are fully vested when made. 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, 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 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 elects 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 intended 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 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 exceeds $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 Jefferson County, MO business, make 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 Your Jefferson County, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Jefferson County, 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 our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A few detailed Google searches are a poor replacement for years of experience and everyday interaction with retirement plans. Financial advisors can work with small business owners to design a 401(k) plan meant specifically to benefit them. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and managing a plan — There are numerous requirements you must adhere to when initiating your small business 401(k). You must:
- 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 oversee the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The phrase "401(k)" might appear on a job listing as a bullet point, but many in the job market don't know the full benefits a plan provides. We can bridge the phrase "401(k)" to concrete steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to provide investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally 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 can talk directly to your small business's employees so they're confident with the status of their retirement savings.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to harsh fees. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are morally and legally obligated to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers considerable value to Jefferson County, MO small business owners who are looking to set up 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 prospective employees.
Call Correct Capital to Start a 401(k) For Your Small Business in Jefferson County, MO
If you own a small business in Jefferson County, MO, you want to focus on what you do best and what you're passionate about – not being distracted 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 Jefferson County, MO business today, call Correct Capital at 877-930-4015 or contact us online.
