401(k) for small business in Millstadt, IL. Creating a 401(k) plan for your small business in Millstadt, IL can offer various benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. In addition to offering more benefits than competitors, offering a 401(k) plan also affords numerous tax benefits for both employers and employees. But, some business owners may still be wary because of the time commitment, as well as the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Millstadt, IL financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We take the heavy financial lifting off your plate while you focus on making your business thrive. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to learn more about creating a 401(k) for your small business in Millstadt, IL.
Why You Should Up a 401(k) for Your Small Millstadt, IL Business
Establishing and maintaining a 401(k) for a small business in Millstadt, IL can do wonders for employers, your workers, and your business's bottom line:
- Attract and retain top employees — Providing retirement plans is an important asset for attracting and retaining top talent, especially in a competitive Millstadt, IL 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 deductions — Both employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers are tax deductible up to the yearly corporate tax deduction limit on employer contributions, as stipulated in section 404 of the Internal Revenue Code. 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 financial security for employees — A 401(k) plan allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security ultimately leads to more productivity.
- Decreased liability — Employers owe a fiduciary duty to their employees when they offer retirement plans, which involves a wide range of investment understanding and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), most of that fiduciary duty will be placed on them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the critical tasks of employee education, compliance, and administrative tasks on your behalf, so you can reap the rewards of offering a plan without much hassle. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can easily rollover their 401(k) to a new retirement account without much hassle to you.
What 401(k) Plans Are Available to Small Businesses 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 put savings into the account through money taken out of their paychecks. Most 401(k)s have 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 abide by stringent nondiscrimination requirements, and undergo yearly tests to ensure they remain compliant. The IRS mandates 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.
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 it is pre-tax money, 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 reduce 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 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 automatic contribution rate starts at 3% and increases by 1% annually until it reaches a maximum of 6%, unless the employee elects a different contribution rate.
In exchange for required 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 make higher contributions 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 is more than $250,000.
The "best" plan for your will depend on your business and employees. If you're interested in establishing a 401(k) plan for your small Millstadt, IL business, schedule an appointment with one of our advisers today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Small Millstadt, IL Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Millstadt, IL employers might still be uneasy, as they may not have the knowledge, 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 few detailed Google searches are a poor replacement for years of experience and working on retirement plans every day. Financial advisors can work with small business owners to develop a 401(k) plan meant expressly to benefit them. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and operating a plan — There are specific steps you must take when establishing 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 assist with all of the above requirements, and oversee the operation and yearly reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The phrase "401(k)" might show up on a job ad 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 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 experienced with portfolio management will be able to provide market insight, as well as work within investment concepts 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 can speak directly to your small business's employees so feel at ease with how their money is being held and invested.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following the rules correctly 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 — As a plan sponsor, small business owners have a fiduciary duty to act in the best interest of their employees. We are morally 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 offers significant 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 Set Up a 401(k) For Your Small Business in Millstadt, IL
If you own a small business in Millstadt, IL, 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 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 Millstadt, IL business today, call Correct Capital at 314-930-401(k) or contact us online.