401(k) for small business in Kirkwood, MO. Establishing a 401(k) plan for your small business in Kirkwood, MO can offer 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, offering a 401(k) plan can also help both businesses and employees reduce their tax liability. However, 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 Kirkwood, MO financial planners and retirement consultants work with companies large and small to offer 401(k) plans that fit what their business needs and what their employees want. We do most of the 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 setting up a 401(k) for your small business in Kirkwood, MO.
Should I Establish a 401(k) For My Kirkwood, MO Small Business?
Setting up and operating a 401(k) for a small business in Kirkwood, MO can do wonders for you, your workers, and your business goals alike:
- recruit and retain top employees — Offering retirement plans can be an important tool for attracting and keeping high-performing workers, especially if many Kirkwood, MO companies are advertising 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 you offer 401(k)s to rank-and-file employees as well.
- 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 surpass 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 employers 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 financial security for employees — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security ultimately leads to more productivity.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a a deep level of investment understanding 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 be placed on them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the critical tasks of employee education, compliance, and administrative duties on your behalf, so you can benefit from the rewards of offering a plan without much nuisance. Furthermore, 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 much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in Kirkwood, 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:
401(k) Plans
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s offer a wide range of investment options. Employers can make matching contributions as an added perk to employees. Most 401(k) plans must meet rigid nondiscrimination requirements, and undergo 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 turn 50 or older this year, in which case the limit is $30,000.
Kirkwood, MO companies 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 contributions are made before taxes are taken out, and the employee can then deduct the amount contributed from their taxable income. Taxes are paid when the money is withdrawn.
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 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 allow plan participants to diversify their tax exposure 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 contributions that are fully vested when made. To meet Safe Harbor requirements, you have four options:
- 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 themselves.
- 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 maxes out at 6%, unless the employee decides on 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 intended for people who are self-employed, or a business where the only employee is a spouse. Contributions can be deducted from taxable income and gains grow tax-deferred until 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 is more than $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're thinking of setting up a 401(k) plan for your small Kirkwood, MO business, schedule a meeting with a member of our advisor team today to get started.
How a Financial Advisor Can Help Your Kirkwood, MO Small Business With Your 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Kirkwood, MO employers may still be cautious, as they may not have the know-how, time, or interest to establish and operate a plan. That’s where we come in. 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 quick internet searches can't come close to offering the same level 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.
- Establishing and operating a plan — There are numerous requirements you must follow 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 do all of that for you, and manage the operation and yearly reviews of the plan.
- Marketing your 401(k) plan to those in the job market — The phrase "401(k)" might appear 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 connect the phrase "401(k)" to definite 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 experienced with portfolio management will be able to provide investment insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best position employees' savings 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 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 stiff fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally break with the regulations.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are ethically 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 considerable value to Kirkwood, MO small business owners who are looking to create 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 Establish a 401(k) For Your Small Business in Kirkwood, MO
If you own a small business in Kirkwood, MO, you want to spend your time on what you do best and what you're passionate about – not being distracted by administrative tasks you may or may not be knowledgeable about. 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 Kirkwood, MO business today, call Correct Capital at 877-930-4015 or contact us online.
