401(k) for small business in Manchester, MO. Initiating a 401(k) plan for your small business in Manchester, MO can offer various benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. Beyond just offering more benefits than competitors, providing a 401(k) plan also provides numerous tax benefits for both employers and employees. However, some business owners may still be cautious because of the time involved in establishing and operating a plan, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Manchester, MO financial advisors and retirement consultants help companies of all sizes 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 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 Manchester, MO.
Benefits of Setting Up a 401(k) for Your Small Manchester, MO Business
Establishing and maintaining a 401(k) for a small business in Manchester, MO can do wonders for you, your employees, and your business's bottom line:
- Attract and retain top employees — Providing retirement plans can be an important asset for attracting and retaining high-performing workers, particularly if many Manchester, MO companies are advertising for the same position. Employees see a 401(k) as a valuable benefit, and offering one can help differentiate your business from competitors, 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 employers make are tax deductible up to the yearly 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. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased employee retirement savings — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to more productivity.
- Decreased liability — Employers take on a fiduciary duty to their employees when they provide retirement plans, which involves a a deep level of investment understanding and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to establish and operate your small business's 401(k), most of that fiduciary duty will be placed on them.
- Ease of administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the vast majority of employee education, compliance, and administrative tasks on your behalf, so you can benefit from the rewards of offering a plan without much nuisance. Furthermore, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new company, they can easily rollover their 401(k) to an IRA or new 401(k) without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Manchester, 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 money taken out of their paychecks. Most 401(k)s offer a diversity of investment options. Employers can employers can deposit an equal amount as their employees as an additional benefit to employees. Most 401(k) plans must adhere to stringent 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 that is $22,500, unless you turn 50 or older this year, in which case the limit is $30,000.
Manchester, MO companies 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 at different times than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning the contributions are made 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 money the employee's already paid taxes on, meaning the money grows tax-free and the savings and any gains can be withdrawn tax-free, as 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 more popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner you would be obligated 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, 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 money is taken out of their paycheck unless they decide not to. The default contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 6%, unless the employee elects a different contribution rate.
In exchange for obligatory 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 people who are self-employed, or a business where the only employee is a spouse. Contributions are tax deductible and the money is taxed when it's withdrawn. This allows participants to make higher contributions 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.
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 Manchester, MO business, make an appointment with a member of our team today to get started.
How a Financial Advisor Can Help Small Manchester, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Manchester, MO employers may still be uneasy, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some 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 offering the same degree of skill and experience as a professional retirement consultant. Financial advisors can work with small business owners to create a 401(k) plan meant specifically to benefit their company. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and operating a plan — There are specific steps you must take when initiating 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 participant
A financial advisory firm can do all of that for you, and handle the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to prospective employees — The phrase "401(k)" might appear on a job listing as a bullet point, but many in the job market don't know the full benefits a plan provides. We can bridge the term "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 qualified to perform portfolio management will be able to provide market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to best position employees' money for further growth.
- Employee education — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we can speak directly to your small business's employees so feel at ease 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 penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently fail to comply with a requirement.
- Fiduciary duty — As a plan sponsor, 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 funds.
A financial advisor offers remarkable value to Manchester, MO small business owners who are looking to establish a 401(k) plan. By partnering with a financial advisor, small business owners can save on taxes and make their business more attractive to current and prospective employees.
Call Correct Capital to Establish a 401(k) For Your Small Business in Manchester, MO
If you own a small business in Manchester, MO, you want to focus 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 Manchester, MO business today, call Correct Capital at 314-930-401(k) or contact us online.