401(k) for small business in Lemay, MO. Establishing a 401(k) plan for your small business in Lemay, MO can offer various benefits to both you and the people that work for you, helping businesses offer more security and benefits to people in the job market. Beyond just attracting great employees, providing a 401(k) plan also provides 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 complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Lemay, 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 take the heavy financial lifting off your plate while you focus on making your business flourish. Call Correct Capital today at 877-930-4015 or contact us online to get started with setting up a 401(k) for your small business in Lemay, MO.
Should I Establish a 401(k) For My Lemay, MO Small Business?
Setting up and operating a 401(k) for a small business in Lemay, MO has numerous benefits, for you, your employees, and your business's bottom line:
- recruit and retain great talent — Providing a 401(k) plan is an important asset for attracting and keeping top talent, especially if many Lemay, MO companies are advertising for the same position. One survey says 401(k) plans are the most important financial benefit to employees, 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 exceed the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. The federal government also offers tax credits when employers 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 retirement account allows employees to feel better about how they'll live in retirement. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers owe a fiduciary duty to their employees when they offer 401(k) plans, which involves a wide range of investment comprehension and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), most of that liability 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 handle the lion's share of employee education, compliance, and administrative tasks 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 simply rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
Types of 401(k) Plans For Your Small Business in Lemay, 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 how many employees they have:
401(k) Plans
In any 401(k) plan, employees can put savings into the account through payroll deductions. 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 perk to employees. Most 401(k) plans must abide by rigid nondiscrimination requirements, and perform yearly tests to ensure the plan doesn't favor highly compensated employees. The IRS mandates contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case you can contribute an additional $7,500 as a catch-up contribution.
Lemay, 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. 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 withdrawal is made. 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 decide to set up a Safe Harbor 401(k), as an employer you would be obligated to make contributions that are fully vested when made. To meet Safe Harbor requirements, you have four options:
- In a non-elective contribution, an employer must contribute 3% of each eligible employee's compensation to the plan, whether or not 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 default contribution rate starts at 3% and increases by 1% every year until it reaches a maximum of 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 people who are self-employed, or a business where the only employee is a spouse. Contributions can be deducted from taxable income and gains grow tax-deferred until the money is taken out. 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.
The "best" plan for your will depend on your business and employees. If you're interested in establishing a 401(k) plan for your small Lemay, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Small Lemay, MO Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Lemay, MO employers might still be uneasy, 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 a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A handful of quick internet searches can't come close to providing the same degree of skill and experience as a licensed advisory firm. Financial advisors can work with small business owners to design a 401(k) plan meant expressly to benefit their business. 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 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 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 as a bullet point, but many in the job market don't know the full benefits a plan provides. We can bridge the phrase "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 experienced with portfolio management will be able to offer investment 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 — Employees need to understand their plan in order to get the greatest reward from it. 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 — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to stiff fines. 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 responsibility to act with diligence, prudence, and care. We are morally and legally obligated 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 Lemay, 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 Start a 401(k) For Your Small Business in Lemay, MO
If you own a small business in Lemay, MO, you want to spend your energy on why you started your business – not being distracted 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 Lemay, MO business today, call Correct Capital at 877-930-4015 or contact us online.
