401(k) for small business in Madison County, IL. Initiating a 401(k) plan for your small business in Madison County, IL provides numerous 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 top talent, offering 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 involved in setting up and maintaining a plan, as well as the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Madison County, IL financial planners and retirement consultants work with companies large and small to offer 401(k) plans that fit what their business needs and what their employees want. We do most of the work for you, so you can focus 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 learn more about setting up a 401(k) for your small business in Madison County, IL.
Why You Should Up a 401(k) for Your Small Madison County, IL Business
Establishing and operating a 401(k) for a small business in Madison County, IL has numerous benefits, for employers, your workers, and your business goals alike:
- Attract and retain top employees — Providing retirement plans is an essential asset for attracting and keeping top talent, particularly in a competitive Madison County, IL 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 benefits — Both businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions are not more than the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several tax credits when companies first establish a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- 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.
- Decreased liability — Employers assume a fiduciary duty to their employees when they provide retirement plans, which involves a a deep level of investment comprehension and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to initiate and manage your small business's 401(k), the majority of that liability will go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, 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 putting in too much work yourself. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, they can easily perform a 401(k) rollover to a new retirement account without you having to do much work.
Types of 401(k) Plans That Can Help Your Small Business in Madison County, IL
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 size:
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s offer a diversity of 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 follow rigid nondiscrimination requirements, and perform yearly 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 are 50 or older, in which case the limit is $30,000.
Madison County, IL employers 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 the tax benefits. 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 the savings and any gains can be withdrawn tax-free, so long as the plan participant has had the account for five years and is 59-½ years old when the money is taken out. Roth 401(k)s are becoming more 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 fully vested contributions to your employees' accounts. 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, 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 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% 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 people who are self-employed, or businesses where the only employees are spouses. Contributions are tax deductible and earnings grow tax-deferred until 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.
The "best" plan for your will depend on your business and your and your employees' needs. If you're interested in setting up a 401(k) plan for your small Madison County, IL business, make an appointment with a member of our advisor team today to discover more about the benefits and options available to you.
How a Financial Advisor Can Help Small Madison County, IL Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Madison County, IL employers might still be wary, 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 our advisory firm can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A handful of detailed Google searches can't come close to providing the same degree of skill and experience as a professional retirement consultant. Financial advisors can work with small business owners to design a 401(k) plan meant specifically to benefit their business. 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 numerous requirements you must adhere to when beginning 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 oversee the operation and annual reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The term "401(k)" might show up on a job ad as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. 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 well versed in portfolio management will be able to offer investment 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 feel good about 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 fees. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interest of plan participants. We are ethically and legally bound to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor can provide considerable value to Madison County, IL 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 Madison County, IL
If you own a small business in Madison County, IL, you want to spend your energy on what you do best and what you're passionate about – not being distracted by administrative tasks you may not have the time, knowledge, or interest to manage. 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 Madison County, IL business today, call Correct Capital at 314-930-401(k) or contact us online.