401(k) for small business in Millstadt, IL. Establishing a 401(k) plan for your small business in Millstadt, IL can offer various benefits to both you and the people that work for you, helping businesses stand out and provide long-term financial security to their employees. Beyond just offering more benefits than competitors, offering a 401(k) plan can also help both businesses and employees lower their tax liability. However, some business owners may still be cautious because of the time involved in establishing and operating an account, in addition to the complex web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Millstadt, 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 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' retirement accounts. Call Correct Capital today at 877-930-4015 or contact us online to get started with establishing a 401(k) for your small business in Millstadt, IL.
Benefits of Setting Up a 401(k) for Your Small Millstadt, IL Business
Establishing and operating a 401(k) for a small business in Millstadt, IL has numerous benefits, for employers, your employees, and your business goals alike:
- Attract and keep great talent — Offering a 401(k) plan is a valuable tool for recruiting and keeping top talent, especially 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 businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make are tax deductible up to the annual corporate tax deduction limit on employer contributions, as defined in section 404 of the Internal Revenue Code. There are also several tax credits for first-time 401(k) plans and offering automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — 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 take on a fiduciary duty to their employees when they provide retirement plans, which involves a a deep level of investment knowledge and obligations. If you work with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), the bulk of that liability will go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll handle the critical tasks of employee education, compliance, and administrative tasks on your behalf, so you can enjoy the rewards of offering a plan without putting in too much work yourself. In addition, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, they can easily perform a 401(k) rollover to an IRA or new 401(k) without you having to do much work.
Types of 401(k) Plans For 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. 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 contribute 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 additional perk to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and undergo annual tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you turn 50 or older this year, in which case you can contribute an additional $7,500 as a catch-up contribution.
Millstadt, 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 — Contributions made with a traditional deferral are taxed differently than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning the contributions are made before taxes are taken out, and the employee can then deduct the amount deposited from their taxable income. Taxes are paid when the money is withdrawn.
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, so 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 more popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be obligated to make contributions that are fully vested when made. 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 have a portion of their pay contributed to the plan unless they decide not to. The default contribution rate starts at 3% and increases by 1% every year until it reaches a maximum of 6%, unless the employee elects a different contribution rate.
Because you are required to make contributions, your business would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are intended for owner-only businesses, or a business where the only employee is a spouse. 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 are not subject to annual filings with the IRS unless the account balance exceeds $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're thinking of opening a 401(k) plan for your small Millstadt, IL business, schedule an appointment with a member of our team 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
Given the great things a 401(k) plan can do for a small business, some Millstadt, IL employers may still be cautious, 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 help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A handful of detailed Google searches can't come close to providing the same level 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 specific steps you must take when initiating your small business 401(k). You must:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Develop a record keeping system
- Provide plan information to eligible employees
A financial advisory firm can assist with all of the above requirements, and manage the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might appear on a job ad in a list of benefits, but many in the job market don't fully understand what a 401(k) entails. We can connect the phrase "401(k)" to concrete steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in portfolio management will be able to offer market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to best position employees' savings 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 abide by various rules and contribution limits when offering a 401(k) plan. Not following the rules correctly can lead to harsh fines. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are morally and legally mandated to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor can provide significant value to Millstadt, IL small business owners who are looking to establish a 401(k) plan. By consulting 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 Start 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 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 877-930-4015 or contact us online.
