401(k) for small business in Ladue, MO. Initiating a 401(k) plan for your small business in Ladue, MO provides numerous benefits to both you and the people that work for you, helping businesses stand out and provide a more secure to their employees. Beyond just attracting top talent, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners might not be confident they want to proceed because of the time commitment, as well as the complex web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Ladue, MO financial advisors and retirement consultants help companies of all sizes offer customized and successful 401(k) plans. We take the heavy financial lifting off your plate while you focus on making your business flourish. 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.
Benefits of Setting Up a 401(k) for Your Small Ladue, MO Business
Establishing and operating a 401(k) for a small business in Ladue, MO has numerous benefits, for employers, your workers, and your business's bottom line:
- Attract and retain great employees — Offering a 401(k) plan is an essential tool for recruiting and retaining top talent, particularly if many Ladue, MO companies are hiring for the same position. 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 employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible up to the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several tax credits for first-time 401(k) plans and offering 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 spend their golden years. 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 wide range of investment savvy and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), the bulk of that fiduciary duty will go to them.
- Simple administration — When you parter with a 3(16) administrator to establish your small business 401(k) plan, they'll handle the lion's share of employee education, compliance, and administrative responsibilities for you, so you can enjoy the rewards of offering a plan without putting in too much work yourself. In addition, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can effortlessly perform a 401(k) rollover to a new retirement account without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business 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:
In any 401(k) plan, employees can put funds into the account through money taken out of their paychecks. Most 401(k)s offer many different investment options. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must follow stringent nondiscrimination requirements, and perform annual tests to ensure the plan doesn't discriminate in favor of highly compensated employees. 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 you can contribute an additional $7,500 as a catch-up contribution.
Ladue, 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 — 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 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 money the employee's already paid taxes on, meaning the money grows tax-free and there are no taxes when the money's withdrawn, as 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 decrease tax liability 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. 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 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 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 maxes out at 6%, unless the employee chooses 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
These are intended for people who are self-employed, or a business where the only employee is a spouse. 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 exceeds $250,000.
What plan works best for your and your employees depends on your business and employees. If you're thinking of opening a 401(k) plan for your small Ladue, MO business, schedule a meeting with one of our advisers today to find out 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 managing a 401(k) plan is complex and time-consuming. That’s where a financial advisor can help. Here are some ways that our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A few quick internet searches can't come close to offering the same level of skill and experience as a licensed advisory firm. 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 most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and managing 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 eligible employees
A financial advisory firm can do all of that for you, and manage the operation and yearly reviews of your 401(k).
- Marketing your 401(k) plan to potential 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 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 qualified to perform portfolio management will be able to offer investment insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best position employees' money for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will help 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 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 fines. 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 duty to act in the best interest of plan participants. We are ethically 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 can provide remarkable 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 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 Ladue, MO
If you own a small business in Ladue, MO, you want to spend your time on why you started your business – 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.