401(k) for small business in Madison County, IL. Creating a 401(k) plan for your small business in Madison County, IL provides various benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. Beyond just offering more benefits than competitors, providing a 401(k) plan also provides numerous tax benefits for both employers and employees. But, some business owners may still be cautious because of the time involved in setting up and operating a plan, as well as the complex web of regulations, laws, and investment options available.
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 their business and provide stability for their employees. We take the heavy financial lifting off your plate, so you can focus on growing your business while we focus on growing your and your employees' savings. Speak to a Correct Capital team member today at 877-930-4015 or complete our online form to learn more about setting up a 401(k) for your small business in Madison County, IL.
Should I Establish a 401(k) For My Madison County, IL Small Business?
Setting up 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 great employees — Offering retirement plans is an important asset for attracting and keeping top talent, particularly if many Madison County, IL companies are advertising for the same job. 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 they are offered to people beyond the highest ranking employees.
- Tax deductions — Both employers and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not surpass the yearly corporate tax deduction limit on employer contributions, as defined in section 404 of the Internal Revenue Code. The federal government also offers tax credits when employers first set up 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 save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to a more productive workforce.
- Reduced liability — Employers assume a fiduciary responsibility to their employees when they provide retirement plans, which involves a a deep level of investment understanding and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to establish and manage your small business's 401(k), most of that fiduciary duty will go to 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 tasks on your behalf, so you can reap the rewards of offering a plan without putting in too much work yourself. Moreover, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new job elsewhere, they can effortlessly perform a 401(k) rollover to a new retirement account without you having to do much work.
What 401(k) Plans Are Available to Small Businesses 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 how many employees they have:
401(k) Plans
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 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 added benefit to employees. Most 401(k) plans must meet stringent nondiscrimination requirements, and perform yearly 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.
Madison County, IL companies with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The main 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 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, as 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 increasingly popular as they allow employees 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 required to make contributions that are fully vested when made. 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 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 choose to opt out or contribute a different amount. The default contribution rate starts at 3% and increases by 1% every year until it reaches a maximum of 6%, unless the employee chooses a different contribution rate.
Because you are required to make contributions, your company would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are are meant for owner-only businesses, or businesses where the only employees are spouses. Contributions can be deducted from taxable income 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 are not subject to annual filings with the IRS unless the account balance surpasses $250,000.
The "best" plan for your will depend on your business and employees. If you're thinking of establishing a 401(k) plan for your small Madison County, IL 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 Your Madison County, IL Small Business With Your 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Madison County, IL employers may still be cautious, as managing a 401(k) plan is complex and time-consuming. That’s where a financial advisor can help. Here are some some of the many ways that our advisory firm can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few quick internet searches can't come close to offering 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 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 numerous requirements you must adhere to when establishing your small business 401(k). You must:
- 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 assist with all of the above requirements, and handle the operation and yearly reviews of the plan.
- Marketing your 401(k) plan to prospective employees — The phrase "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 concrete steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to provide 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 help them. At Correct Capital, we can talk directly to your small business's employees so they're confident with how their money is being held and invested.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. Not following them can lead to harsh penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary responsibility to act in the best interest of plan participants. We are morally and legally required to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor offers significant value to Madison County, IL small business owners who want to experience the benefits of a 401(k) plan. By working 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 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 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 Madison County, IL business today, call Correct Capital at 877-930-4015 or contact us online.
