401 (k) for small business in Lake St. Louis, MO. Creating a 401(k) plan for your small business in Lake St. Louis, MO can offer various 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 great employees, providing 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 commitment, in addition to the complex web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Lake St. Louis, 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 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 314-930-401(k) or fill out our online form to get started with creating a 401(k) for your small business in Lake St. Louis, MO.
Should I Establish a 401(k) For My Lake St. Louis, MO Small Business?
Establishing and operating a 401(k) for a small business in Lake St. Louis, MO has numerous benefits, for employers, your employees, and your business's bottom line:
- recruit and keep top employees — Providing retirement plans is an important asset for attracting and keeping top talent, especially in a competitive Lake St. Louis, MO job market. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax deductions — Both employers 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 do not surpass the annual 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. Employee contributions reduce their taxable income and their contributions grow tax free.
- Increased employee retirement savings — A 401(k) plan allows employees to feel better about how they'll spend their golden years. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers owe a fiduciary duty to their employees when they offer retirement plans, which involves a wide range of investment understanding and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to establish and operate your small business's 401(k), much of that fiduciary duty will be placed on them.
- Ease of administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll take care of the critical tasks of employee education, compliance, and administrative tasks for you, so you can reap the rewards of offering a plan without much nuisance. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new job elsewhere, they can easily rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Lake St. Louis, MO?
Depending on what industry you're in, 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 how many employees they have:
In any 401(k) plan, employees can put savings into the account through payroll deductions. Most 401(k)s offer a wide range of investment opportunities. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must meet stringent nondiscrimination requirements, and undergo annual tests to ensure they remain compliant. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Lake St. Louis, 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 contributions are made 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 the savings and any gains can be withdrawn tax-free, as 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 decrease tax liability 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 contribute to the plan.
- 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 portion 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 chooses a different contribution rate.
In exchange for mandatory employer contributions, Safe Harbor plans are not 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 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 is more than $250,000.
What plan works best for your and your employees depends on your business and your and your employees' needs. If you're thinking of establishing a 401(k) plan for your small Lake St. Louis, MO business, make an appointment with a member of our advisor team today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Small Lake St. Louis, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Lake St. Louis, MO employers may still be cautious, 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 a financial advisor can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few detailed Google searches can't come close to providing the same degree of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to develop a 401(k) plan meant expressly to benefit their business. 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 beginning your small business 401(k). You have to:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Develop 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 yearly reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — 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) entails. We can connect the term "401(k)" to definite 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 provide market insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to optimally 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 feel good about with how their money is being held and invested.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to stiff fines. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary responsibility to act in the best interest of their employees. We are morally and legally mandated 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 Lake St. Louis, MO small business owners who are looking to establish 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 Lake St. Louis, MO
If you own a small business in Lake St. Louis, 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 Lake St. Louis, MO business today, call Correct Capital at 314-930-401(k) or contact us online.