401 (k) for small business in Millstadt, IL. Creating a 401(k) plan for your small business in Millstadt, IL provides numerous benefits to both you and the people that work for you, helping businesses offer more security and benefits to prospective employees. 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 might not be confident they want to proceed because of the time involved in setting up and operating a plan, as well as the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Millstadt, IL financial planners 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 the financial and administrative work for you, so you can focus on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-401(k) or contact us online to get started with setting up a 401(k) for your small business in Millstadt, IL.
Should I Establish a 401(k) For My Millstadt, IL Small Business?
Establishing and operating a 401(k) for a small business in Millstadt, IL can do wonders for employers, your workers, and your business's bottom line:
- recruit and keep great talent — Offering a 401(k) plan can be a valuable tool for attracting and retaining top talent, particularly in a competitive Millstadt, IL job market. Some employees will even quit their job over a 401(k), and offering one can help differentiate your business from competitors, especially if they are offered to people beyond the highest earners.
- Tax benefits — 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 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 for first-time 401(k) plans and offering automatic enrollment. Employees can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers assume a fiduciary responsibility to their employees when they provide retirement plans, which involves a wide range of investment comprehension and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), the bulk of that fiduciary duty will go to them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the vast majority of employee education, compliance, and administrative tasks for you, so you can enjoy the rewards of offering a plan without much hassle. Moreover, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new job elsewhere, they can simply rollover their 401(k) to a new retirement account without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in Millstadt, IL
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:
In any 401(k) plan, employees can contribute through payroll deductions. Most 401(k)s have a diversity 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 strict 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 turn 50 or older this year, in which case you can deposit an additional $7,500 as a catch-up contribution.
Millstadt, IL businesses 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 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 employee'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 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 reduce 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' plans. There are four ways in which an employer can 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 decides to contribute to the plan.
- 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 automatic 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.
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 owner-only businesses, or businesses where the only employees are spouses. Contributions are tax deductible and the money is taxed when it's 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 employees. If you're thinking of setting up a 401(k) plan for your small Millstadt, IL business, schedule an appointment with a member of our advisor team today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Your Millstadt, IL Small Business With Your 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Millstadt, IL employers might still be wary, 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 quick internet searches are a poor replacement for decades of experience and everyday interaction with retirement plans. Financial advisors can work with small business owners to create 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 follow 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 eligible employees
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 term "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 connect the term "401(k)" to definite steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to offer market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' money for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will help them. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' employees so feel at ease with the status of their retirement savings.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to stiff fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently fail to comply with a requirement.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are ethically and legally obligated 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 Millstadt, 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 save on taxes and make their business more attractive to current and potential employees.
Call Correct Capital to Start a 401(k) For Your Small Business in Millstadt, IL
If you own a small business in Millstadt, IL, you want to spend your energy on why you started your business – 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 Millstadt, IL business today, call Correct Capital at 314-930-401(k) or contact us online.