401 (k) for small business in Manchester, MO. Establishing a 401(k) plan for your small business in Manchester, MO can offer numerous benefits to both you and the people that work for you, helping businesses stand out and provide long-term financial security to their employees. In addition to offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees lower their tax liability. But, some business owners might not be confident they want to move forward because of the time commitment, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Manchester, MO 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 take the heavy financial lifting off your plate while you focus on your business. Call Correct Capital today at 314-930-401(k) or complete our online form to learn more about creating a 401(k) for your small business in Manchester, MO.
Should I Establish a 401(k) For My Manchester, MO Small Business?
Setting up and operating a 401(k) for a small business in Manchester, MO has numerous benefits, for you, your workers, and your business goals alike:
- recruit and keep great employees — Providing retirement plans is an important asset for recruiting and keeping top talent, especially in a competitive Manchester, MO job market. One survey says 401(k) plans are the most important financial benefit to employees, 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 reduce how much they owe in taxes with a 401(k) plan. Matching contributions employers make are tax deductible up to the annual corporate tax deduction limit on employer contributions, as stipulated in section 404 of the Internal Revenue Code. The federal government also offers 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 financial security for employees — A 401(k) plan allows employees to feel more confident about how they'll live in retirement. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers assume a fiduciary duty to their employees when they offer retirement plans, which involves a a deep level of investment comprehension and obligations. If you work with an ERISA 3(38) Fiduciary advisor to initiate and manage your small business's 401(k), the majority of that liability will be placed on them.
- Simple administration — When you parter with a 3(16) administrator to establish 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 enjoy the rewards of offering a plan without much nuisance. Additionally, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new job elsewhere, they can simply perform a 401(k) rollover to a new retirement account without much hassle to you.
Types of 401(k) Plans For Your Small Business 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. However many employees you have, there is a 401(k) plan that will work for you:
401(k) Plans
In any 401(k) plan, employees can put savings into the account through payroll deductions. Most 401(k)s have a wide range of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an added perk to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and perform annual tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Manchester, MO businesses with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The key difference between traditional and Roth deferrals is when your employees pay taxes on their contributions. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, and the employee can then deduct the amount contributed from their 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 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' 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, 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 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 decides on 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 people who are self-employed, or a business where the only employee is a spouse. Contributions are tax deductible and earnings grow tax-deferred until withdrawn. This allows participants to save more as they can make contributions both as an employee 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 opening a 401(k) plan for your small Manchester, MO business, schedule an appointment with a member of our advisor team today to get started.
How a Financial Advisor Can Help Your Manchester, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Manchester, MO employers may still be uneasy, 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 assist with 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 develop a 401(k) plan meant specifically to benefit them. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up 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
- Establish a record keeping system
- Provide plan information to eligible employees
A financial advisory firm can do all of that for you, and manage 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 listing in a list of benefits, but many in the job market don't know the full benefits a plan provides. We can bridge the term "401(k)" to concrete images of a more secure retirement, with very clear stepping stones on how to get there.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in 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 talk directly to your small business's 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 penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are morally and legally bound to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor can provide considerable value to Manchester, MO small business owners who want to experience the benefits of 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 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 what you do best and what you're passionate about – not being bogged down 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.
