401(k) for small business in Ladue, MO. Establishing a 401(k) plan for your small business in Ladue, 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 offering more benefits than competitors, offering a 401(k) plan also affords numerous tax benefits for both employers and employees. But, some business owners may still be wary because of the time commitment, in addition to the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Ladue, MO financial planners and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We take the heavy financial lifting off your plate, so you can spend your energy on growing your business while we focus on growing your and your employees' retirement accounts. Call Correct Capital today at 877-930-4015 or contact us online to learn more about setting up a 401(k) for your small business in Ladue, MO.
Why You Should Up a 401(k) for Your Small Ladue, MO Business
Setting up and maintaining a 401(k) for a small business in Ladue, MO has numerous benefits, for employers, your employees, and your business's bottom line:
- Attract and retain great employees — Providing retirement plans can be a valuable asset for attracting and keeping high-performing talent, especially in a competitive Ladue, MO job market. Some employees will even quit their job over a 401(k), and offering one can help differentiate your business from competitors, especially if they are offered to people beyond the highest earners.
- Tax benefits — Both businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions are not more than the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several 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 a more productive workforce.
- Reduced liability — Employers owe a fiduciary duty to their employees when they offer 401(k) plans, which involves a a deep level of investment savvy and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to establish and manage your small business's 401(k), much of that liability will be passed onto them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll handle the vast majority of employee education, compliance, and administrative tasks on your behalf, so you can reap 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 moves to a new job elsewhere, they can simply 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 Ladue, 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 contribute through money taken out of their paychecks. Most 401(k)s offer many different 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 additional benefit to employees. Most 401(k) plans must follow strict nondiscrimination requirements, and perform 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 the limit is $30,000.
Ladue, MO employers with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The main difference between traditional and Roth deferrals is the tax benefits. 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 plan participant's tax rate at the time of withdrawal.
With Roth deferrals, contributions are made with money the employee's already paid taxes on, 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 more 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 a business owner 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 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 percentage 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 maxes out at 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 intended for owner-only businesses, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and earnings grow tax-deferred until the money is taken out. This allows participants to make higher contributions as they can make contributions both as an employee and a businesses owner. 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.
The "best" plan for your will depend on your business and employees. If you're thinking of establishing a 401(k) plan for your small Ladue, MO business, schedule an appointment with a member of our advisor team today to get started.
How a Financial Advisor Can Help Your Ladue, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Ladue, MO employers might still be wary, 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 ways that our advisory firm can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A handful of detailed Google searches are a poor replacement for decades of experience and everyday interaction with retirement plans. Financial advisors can partner with small business owners to create 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 specific steps you must take when initiating 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and oversee the operation and annual reviews of the plan.
- Marketing your 401(k) plan to potential employees — The phrase "401(k)" might show up on a job listing as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. We can bridge the term "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 offer market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' savings 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 feel good about with how their money is being held and invested.
- Compliance — Employers must abide by 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 — When offering a retirement plan, small business owners have a fiduciary responsibility to act in the best interest of plan participants. We are ethically and legally mandated to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor can provide significant value to Ladue, 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 Set Up a 401(k) For Your Small Business in Ladue, MO
If you own a small business in Ladue, 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 Ladue, MO business today, call Correct Capital at 877-930-4015 or contact us online.
