401 (k) for small business in Oakland, MO. Creating a 401(k) plan for your small business in Oakland, MO provides 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. Beyond just offering more benefits than competitors, providing a 401(k) plan also affords numerous tax benefits for both employers and employees. But, some business owners may still be cautious because of the time involved in setting up and maintaining a plan, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Oakland, MO financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do most of the work for you while you focus on making your business thrive. Speak to a Correct Capital team member today at 314-930-401(k) or fill out our online form to learn more about establishing a 401(k) for your small business in Oakland, MO.
Do I Need a 401(k) For My Oakland, MO Small Business?
Setting up and operating a 401(k) for a small business in Oakland, MO can do wonders for employers, your workers, and your business goals alike:
- Attract and keep top talent — Offering retirement plans can be a valuable tool for attracting and retaining high-performing workers, particularly in a competitive Oakland, 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 they are offered to people beyond the highest ranking employees.
- Tax benefits — Both employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers 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 taxable income and their contributions grow tax free.
- Increased financial security for employees — A retirement account allows employees to feel better about how they'll spend their golden years. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers assume a fiduciary duty to their employees when they provide retirement plans, which involves a wide range of investment comprehension and obligations. If you partner with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), most 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 responsibilities for you, so you can benefit from the rewards of offering a plan without much hassle. Furthermore, 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 That Can Help Your Small Business in Oakland, MO
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. However many employees you have, there is a 401(k) plan that will work for you:
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 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 follow 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 contribute an additional $7,500 as a catch-up contribution.
Oakland, MO businesses with multiple employees have a few different things to think about when setting 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, 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 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, so long as the plan participant has had the account for five years and is 59-½ years old when the money is taken out. Roth 401(k)s are becoming more popular as they allow plan participants to diversify their tax exposure 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. 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, whether or not the employee chooses 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 percentage of their pay contributed to the plan unless they decide not to. The automatic 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 are meant for owner-only businesses, or a business where the only employee is a spouse. Contributions can be deducted from taxable income and savings grow tax-deferred until the money is taken out. This allows participants to save more 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 is more than $250,000.
What plan works best for your and your employees depends on your business and employees. If you're considering setting up a 401(k) plan for your small Oakland, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Your Oakland, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Oakland, MO employers might still be uneasy, as managing a 401(k) plan is complex and time-consuming. That’s where a financial advisor can help. Here are some ways that a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A few quick internet 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 their company. They can help choose the plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and managing a plan — There are numerous requirements you must adhere to when beginning your small business 401(k). You have to:
- 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 do all of that for you, and handle the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to potential employees — The term "401(k)" might appear on a job ad in a list of benefits, but many in the job market don't know the full benefits a plan provides. We can connect the words "401(k)" to concrete 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 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 optimally position employees' savings 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 they're confident with the status of their retirement savings.
- Compliance — Employers must adhere to 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 your recordkeeper and plan administrator do not inadvertently fail to comply with a requirement.
- Fiduciary duty — When offering a retirement plan, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are morally and legally obligated to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor can provide remarkable value to Oakland, MO small business owners who are looking to set up 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 prospective employees.
Call Correct Capital to Establish a 401(k) For Your Small Business in Oakland, MO
If you own a small business in Oakland, MO, you want to focus on why you started your business – 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 Oakland, MO business today, call Correct Capital at 314-930-401(k) or contact us online.