401(k) for small business in Jefferson County, MO. Setting up a 401(k) plan for your small business in Jefferson County, 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 lower their tax liability. However, some business owners may still be cautious because of the time involved in establishing and maintaining an account, as well as the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Jefferson County, MO financial planners and retirement consultants help companies of all sizes offer 401(k) plans that fit what their business needs and what their employees want. 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 877-930-4015 or complete our online form to get started with setting up a 401(k) for your small business in Jefferson County, MO.
Benefits of Setting Up a 401(k) for Your Small Jefferson County, MO Business
Establishing and maintaining a 401(k) for a small business in Jefferson County, MO can do wonders for you, your workers, and your business's bottom line:
- Attract and keep top talent — Offering a 401(k) plan can be an important asset for attracting and retaining skilled workers, especially if many Jefferson County, MO companies are hiring for the same job. Employees see a 401(k) as a valuable benefit, and offering one can help differentiate your business from competitors, especially if they are offered to people beyond management.
- Tax benefits — Both businesses and employees can reduce their tax liability with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions do not exceed 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 companies 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 save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to more productivity.
- Decreased liability — Employers owe a fiduciary duty to their employees when they offer 401(k) plans, which involves a a deep level of investment knowledge and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to establish and manage your small business's 401(k), most of that fiduciary duty will be passed onto them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll take care of the vast majority of employee education, compliance, and administrative duties for you, so you can reap the rewards of offering a plan without much nuisance. Moreover, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new job elsewhere, they can easily 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 Jefferson County, MO?
Depending on your industry, 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 size:
401(k) Plans
In any 401(k) plan, employees can put savings into the account through money taken out of their paychecks. Most 401(k)s offer a diversity of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an added benefit to employees. Most 401(k) plans must adhere to stringent nondiscrimination requirements, and perform annual tests to ensure the plan doesn't favor highly compensated employees. The IRS sets contribution limits each year; in 2023 that 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.
Jefferson County, MO employers 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 the money is deposited before taxes are taken out, and the employee can then deduct the amount contributed from their 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 the savings and any gains can be withdrawn tax-free, so long as the plan participant has had the account for five years and is 59-½ years old when the withdrawal is made. Roth 401(k)s are becoming increasingly popular as they allow plan participants to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner 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, regardless of whether the employee chooses 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% annually until it reaches a maximum of 6%, unless the employee decides on a different contribution rate.
In exchange for obligatory employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are are meant for owner-only businesses, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and savings grow tax-deferred until the money is taken out. 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 your and your employees' needs. If you're thinking of setting up a 401(k) plan for your small Jefferson County, MO business, schedule a meeting with a member of our team today to discover more about the benefits and options available to you.
How a Financial Advisor Can Help Small Jefferson County, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Jefferson County, MO employers may still be cautious, 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 help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few quick internet searches are a poor replacement for years of experience and everyday interaction with retirement plans. Financial advisors can partner with small business owners to develop a 401(k) plan meant specifically to benefit their business. They can help choose the plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing 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 oversee the operation and annual reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The phrase "401(k)" might show up on a job ad in a list of benefits, but many in the job market don't fully understand what a 401(k) can do for them. We can connect the words "401(k)" to concrete 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 provide market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally 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 can speak directly to your small business's employees so they're confident with how their money is being held and invested.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to harsh fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently fail to comply with a requirement.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary duty 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 retirement accounts.
A financial advisor offers significant value to Jefferson County, 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 Establish 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 bogged down 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 Jefferson County, MO business today, call Correct Capital at 877-930-4015 or contact us online.
