401 (k) for small business in Kirkwood, MO. Setting up a 401(k) plan for your small business in Kirkwood, MO can offer numerous benefits to both you and the people that work for you, helping businesses stand out and provide long-term financial security to their employees. Beyond just attracting top talent, providing 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 complexities of investment and financial regulations.
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 their business and provide stability for their employees. We do the financial and administrative work for you while you focus on making your business thrive. Speak to a Correct Capital team member today at 314-930-401(k) or complete our online form to get started with creating a 401(k) for your small business in Kirkwood, MO.
Why You Should Up a 401(k) for Your Small Kirkwood, MO Business
Setting up and maintaining a 401(k) for a small business in Kirkwood, MO has numerous benefits, for employers, your workers, and your business goals alike:
- recruit and keep top employees — Providing retirement plans is an important tool for attracting and retaining top talent, 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 your business stand out, especially if they are offered to people beyond the highest ranking employees.
- 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 yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. The federal government also offers tax credits when companies first establish a 401(k) plan, and if the employer offers automatic enrollment. Employees can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — A retirement account allows employees to feel more confident about how they'll live in retirement. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers assume a fiduciary responsibility to their employees when they provide 401(k) plans, which involves a wide range of investment savvy and obligations. If you partner 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.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the lion's share of employee education, compliance, and administrative tasks on your behalf, so you can enjoy the rewards of offering a plan without putting in too much work yourself. Additionally, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new job elsewhere, they can easily perform a 401(k) rollover to an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses 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 put savings into the account through money taken out of their paychecks. Most 401(k)s have many different investment options. Employers can make matching contributions as an added perk to employees. Most 401(k) plans must follow strict nondiscrimination requirements, and perform annual tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case you can deposit an additional $7,500 as a catch-up contribution.
Kirkwood, 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 — 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 the money is deposited before taxes are taken out, and the employee can then deduct the amount deposited 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 there are no taxes when the money's withdrawn, so long as the plan participant has been contributing for at least five years and is 59-½ years old when the withdrawal is made. Roth 401(k)s are becoming increasingly popular as they allow employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner you would be required to make fully vested contributions to your employees' accounts. 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, whether or not the employee chooses 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 have a part of their pay contributed to the plan unless they choose to opt out or contribute a different amount. The automatic contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 6%, unless the employee decides on 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 owner-only businesses, or a business where the only employee is a spouse. Contributions can be deducted from taxable income and savings grow tax-deferred until the money is taken out. This allows participants to make higher contributions 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 Kirkwood, MO business, make an appointment with one of our advisers today to get started.
How a Financial Advisor Can Help Your Kirkwood, MO Small Business With Your 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Kirkwood, 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 ways that our advisory firm can help make your life easier in regards to 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 create a 401(k) plan meant expressly to benefit their business. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and operating a plan — There are specific steps you must take when establishing 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 do all of that for you, and oversee the operation and annual reviews of the plan.
- Marketing your 401(k) plan to prospective employees — The word "401(k)" might show up on a job listing 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 bridge the words "401(k)" to definite steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to provide market insight, as well as work within investment concepts 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 your recordkeeper and plan administrator do not inadvertently fail to comply with a requirement.
- Fiduciary duty — As a plan sponsor, 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 can provide remarkable value to Kirkwood, MO small business owners who want to experience the benefits of a 401(k) plan. By partnering 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 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 bogged down 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 Kirkwood, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
