401 (k) for small business in O'Fallon, MO. Initiating a 401(k) plan for your small business in O'Fallon, MO can offer various benefits to both employers and employees, helping businesses stand out and provide a more secure to their 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 sure if they want to move forward because of the time commitment, in addition to the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our O'Fallon, MO financial planners and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do most of the work for you, so you can spend your energy on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-401(k) or complete our online form to learn more about establishing a 401(k) for your small business in O'Fallon, MO.
Why You Should Up a 401(k) for Your Small O'Fallon, MO Business
Establishing and maintaining a 401(k) for a small business in O'Fallon, MO can do wonders for you, your employees, and your business's bottom line:
- Attract and retain great employees — Providing retirement plans is an essential asset for recruiting and keeping top talent, especially if many O'Fallon, MO companies are advertising for the same job. 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 the highest earners.
- Tax deductions — Both businesses 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 exceed the yearly corporate tax deduction limit on employer contributions, as laid out in section 404 of the Internal Revenue Code. There are also several tax credits when companies first set up a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased employee retirement savings — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers owe a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a wide range of investment knowledge and responsibilities. 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 go to 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 duties on your behalf, so you can reap the rewards of offering a plan without much hassle. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, they can easily rollover their 401(k) to a new retirement account without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in O'Fallon, MO?
Depending on what industry you're in, 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 size:
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s offer many different investment options. Employers can employers can deposit an equal amount as their employees as an additional benefit to employees. Most 401(k) plans must follow stringent nondiscrimination requirements, and are subject to 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 you can deposit an additional $7,500 as a catch-up contribution.
O'Fallon, MO employers with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The main difference between traditional and Roth deferrals is the tax benefits. 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, as long as the plan participant has been contributing for at least 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 decide to set up a Safe Harbor 401(k), 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 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 money is taken out of their paycheck unless they decide not to. The default contribution rate starts at 3% and increases by 1% each year until it maxes out at 6%, unless the employee decides on 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
These are intended for owner-only businesses, or businesses where the only employees are spouses. Contributions are tax deductible and gains grow tax-deferred until 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 surpasses $250,000.
What plan works best for your and your employees depends on your business and employees. If you're thinking of setting up a 401(k) plan for your small O'Fallon, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Small O'Fallon, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some O'Fallon, MO employers may still be uneasy, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some some of the many 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 can't come close to providing the same degree of skill and experience as a licensed advisory firm. Financial advisors can partner with small business owners to create a 401(k) plan meant specifically to benefit their company. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and operating a plan — There are specific steps you must take when beginning 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 oversee the operation and annual 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 connect the phrase "401(k)" to specific 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 qualified to perform portfolio management will be able to offer investment insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to optimally position employees' funds 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 — 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 accidentally fail to comply with a requirement.
- Fiduciary duty — When offering a retirement plan, small business owners have a fiduciary duty 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 O'Fallon, MO small business owners who want to experience the benefits of a 401(k) plan. By partnering 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 O'Fallon, MO
If you own a small business in O'Fallon, MO, you want to spend your time on what you do best and what you're passionate about – not being distracted by administrative tasks 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 O'Fallon, MO business today, call Correct Capital at 314-930-401(k) or contact us online.