401 (k) for small business in Ladue, MO. Establishing a 401(k) plan for your small business in Ladue, MO provides various benefits to both employers and employees, helping businesses stand out and provide long-term financial security to their employees. In addition to attracting great employees, offering a 401(k) plan can also help both businesses and employees reduce their tax liability. However, some business owners might not be sure if they want to move forward because of the time involved in setting up and operating a plan, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Ladue, MO financial planners and retirement consultants help companies of all sizes offer 401(k) plans that fit their business and provide stability for their employees. We do the financial and administrative work for you, so you can focus on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-401(k) or contact us online to learn more about creating a 401(k) for your small business in Ladue, MO.
Do I Need a 401(k) For My Ladue, MO Small Business?
Setting up and operating a 401(k) for a small business in Ladue, MO has numerous benefits, for employers, your workers, and your business goals alike:
- recruit and keep top talent — Offering retirement plans is a valuable tool for attracting and retaining high-performing workers, especially if many Ladue, MO companies are hiring for the same job. Some employees will even quit their job over a 401(k), 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 employers 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, as laid out in section 404 of the Internal Revenue Code. The federal government also offers tax credits when companies first establish 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 401(k) plan allows employees to feel better about how they'll live in retirement. Greater financial security ultimately leads to a more productive workforce.
- Decreased liability — Employers owe a fiduciary duty to their employees when they provide retirement plans, which involves a a deep level of investment comprehension and obligations. If you work with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), much of that liability will go to them.
- Ease of administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll handle the vast majority of employee education, compliance, and administrative responsibilities on your behalf, so you can reap the rewards of offering a plan without much nuisance. Furthermore, advisors can help integrate contributions with your payroll system for further simplicity. If an employee takes 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 Ladue, MO?
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. 401(k) plans are available to all businesses, regardless of size:
In any 401(k) plan, employees can contribute through payroll deductions. 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 perk to employees. Most 401(k) plans must abide by strict nondiscrimination requirements, and are subject to 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.
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 — Contributions made with a traditional deferral are taxed differently than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited before taxes are taken out, lowering an employee's 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 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 employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be obligated to make fully vested contributions to your employees' accounts. 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 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 decide not to. 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.
In exchange for required employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are intended for people who are self-employed, or businesses where the only employees are spouses. 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 do not require annual filings with the IRS unless the account balance surpasses $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're interested in establishing a 401(k) plan for your small Ladue, MO business, schedule 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 Small Ladue, MO Businesses With Their 401(k) Plans
Even considering 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 knowledge, 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 help make your life easier in regards to 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 partner with small business owners to develop a 401(k) plan that meets the specific needs of their business and employees. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing a plan — There are numerous requirements you must adhere to when establishing 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 eligible employees
A financial advisory firm can do all of that for you, and oversee the operation and yearly reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The term "401(k)" might appear on a job ad 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 concrete steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are qualified to perform portfolio management will be able to offer market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to best position employees' funds for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will benefit them. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' 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 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 in the best interest of their employees. We are morally and legally obligated to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor offers remarkable value to Ladue, MO small business owners who are looking to set up a 401(k) plan. By consulting with a financial advisor, small business owners can save on taxes and make their business more attractive to current and potential employees.
Call Correct Capital to Start a 401(k) For Your Small Business in Ladue, MO
If you own a small business in Ladue, MO, you want to focus on what you do best and what you're passionate about – not being bogged down 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 Ladue, MO business today, call Correct Capital at 314-930-401(k) or contact us online.