401(k) for small business in Lake St. Louis, MO. Establishing a 401(k) plan for your small business in Lake St. Louis, MO provides various benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. In addition to offering more benefits than competitors, offering a 401(k) plan can also help both businesses and employees lower their tax liability. But, some business owners may still be wary because of the time involved in setting up and operating an account, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Lake St. Louis, MO financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do most of the work for you, 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 314-930-401(k) or contact us online to get started with creating a 401(k) for your small business in Lake St. Louis, MO.
Benefits of Setting Up a 401(k) for Your Small Lake St. Louis, MO Business
Establishing and maintaining a 401(k) for a small business in Lake St. Louis, MO can do wonders for you, your employees, and your business goals alike:
- recruit and retain top employees — Offering retirement plans is an essential tool for attracting and keeping high-performing workers, particularly if many Lake St. Louis, MO companies are advertising for the same job. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if they are offered to people beyond management.
- Tax deductions — Both businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make 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 enjoy tax-deferred contributions and potentially reduce their taxable income.
- 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 take on 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 set up and manage your small business's 401(k), the bulk of that liability will be placed on them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll handle the lion's share of employee education, compliance, and administrative duties on your behalf, so you can benefit from the rewards of offering a plan without much hassle. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can easily rollover their 401(k) to a new retirement account without you having to do much work.
Types of 401(k) Plans That Can Help Your Small Business in Lake St. Louis, 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:
In any 401(k) plan, employees can contribute through payroll deductions. Most 401(k)s have 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 perk to employees. Most 401(k) plans must meet strict nondiscrimination requirements, and perform yearly tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS sets 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.
Lake St. Louis, MO businesses 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. 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 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 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 opt for this provision, as an employer you would be required 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, 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 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 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
These are intended for owner-only businesses, or businesses where the only employees are spouses. Contributions are tax deductible and the money is taxed when it's withdrawn. This allows participants to save more as they can make contributions both as a worker and a businesses owner. Unlike other 401(k) plans, individual 401(k)s do not require annual filings with the IRS unless the account balance is more than $250,000.
What plan works best for your and your employees depends on your business and employees. If you're considering establishing a 401(k) plan for your small Lake St. Louis, MO business, schedule an appointment with a member of our advisor team today to get started.
How a Financial Advisor Can Help Small Lake St. Louis, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Lake St. Louis, MO employers may still be uneasy, as they may not have the knowledge, time, or interest to establish and operate a plan. That’s where a financial advisor can help. Here are some some of the many ways that our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A handful of detailed Google searches can't come close to providing the same level of skill and experience as a professional retirement consultant. Financial advisors can partner 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 right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and operating a plan — There are numerous requirements you must follow when beginning 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 assist with all of the above requirements, and oversee the operation and annual reviews of the plan.
- Advertising your 401(k) plan to prospective employees — 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 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 offer 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 — 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 how their money is being held and invested.
- Compliance — Employers must adhere to various rules and contribution limits when offering a 401(k) plan. Not following them can lead to harsh fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are morally and legally required to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers significant value to Lake St. Louis, MO small business owners who are looking to set up 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 Start a 401(k) For Your Small Business in Lake St. Louis, MO
If you own a small business in Lake St. Louis, MO, you want to spend your energy on why you started your business – not being distracted by retirement plan responsibilities 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 Lake St. Louis, MO business today, call Correct Capital at 314-930-401(k) or contact us online.