401(k) for small business in Oakville, MO. Initiating a 401(k) plan for your small business in Oakville, MO provides numerous benefits to both you and the people that work for you, helping businesses stand out and provide a more secure to their employees. In addition to attracting great employees, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. However, some business owners may still be wary because of the time involved in setting up and maintaining a plan, as well as the complex web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Oakville, MO financial advisors and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We do the financial and administrative work for you, so you can spend your energy on growing your business while we focus on growing your and your employees' retirement accounts. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to learn more about establishing a 401(k) for your small business in Oakville, MO.
Why You Should Up a 401(k) for Your Small Oakville, MO Business
Setting up and operating a 401(k) for a small business in Oakville, MO can do wonders for you, your employees, and your business goals alike:
- recruit and keep great employees — Offering retirement plans can be an important asset for attracting and keeping top talent, particularly in a competitive Oakville, MO job market. One survey says 401(k) plans are the most important financial benefit to employees, and offering one can help your business stand out, especially if they are offered to people beyond management.
- Tax deductions — Both businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not surpass the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. 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 retirement account allows employees to feel more confident about how they'll spend their golden years. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers owe a fiduciary responsibility to their employees when they provide retirement plans, which involves a wide range of investment savvy and obligations. If you work with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), much of that liability will be passed onto them.
- Ease of administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll handle the lion's share of employee education, compliance, and administrative responsibilities for you, so you can benefit from the rewards of offering a plan without much hassle. Moreover, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new job elsewhere, they can simply perform a 401(k) rollover to an IRA or new 401(k) without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in Oakville, MO
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. 401(k) plans are available to all businesses, regardless of how many employees they have:
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 make matching contributions as an additional benefit to employees. Most 401(k) plans must meet rigid nondiscrimination requirements, and are subject to 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 deposit an additional $7,500 as a catch-up contribution.
Oakville, 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 — Contributions made with a traditional deferral are taxed at different times 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. 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 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 increasingly popular as they allow plan participants to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner 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 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 automatic contribution rate starts at 3% and increases by 1% annually until it reaches a maximum of 6%, unless the employee chooses a different contribution rate.
Because you are required to make contributions, your company would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are intended for people who are self-employed, or a business where the only employee is a spouse. Contributions can be deducted from taxable income 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 is more than $250,000.
What plan works best for your and your employees depends on your business and your and your employees' needs. If you're considering setting up a 401(k) plan for your small Oakville, MO business, make an appointment with a member of our advisor team today to get started.
How a Financial Advisor Can Help Small Oakville, MO Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Oakville, MO employers might still be wary, 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 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 create a 401(k) plan that meets the specific needs of their business and employees. 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 initiating your small business 401(k). You must:
- 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.
- Marketing your 401(k) plan to potential employees — The term "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 phrase "401(k)" to concrete steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to offer investment insight, as well as work within investment principles 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 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 how their money is being held and invested.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to harsh fees. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are ethically and legally mandated to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor offers remarkable value to Oakville, 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 prospective employees.
Call Correct Capital to Set Up a 401(k) For Your Small Business in Oakville, MO
If you own a small business in Oakville, MO, you want to focus on what you do best and what you're passionate about – not being distracted 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 Oakville, MO business today, call Correct Capital at 314-930-401(k) or contact us online.