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 you and the people that work for you, helping businesses stand out and provide a more secure to their employees. In addition to offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees lower their tax liability. However, some business owners might not be confident they want to move forward because of the time involved in setting up and maintaining a plan, as well as the complexities of investment and financial regulations.
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 while you focus on making your business thrive. 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 O'Fallon, MO.
Do I Need a 401(k) For My O'Fallon, MO Small Business?
Establishing and maintaining a 401(k) for a small business in O'Fallon, MO has numerous benefits, for employers, your employees, and your business goals alike:
- Attract and retain great talent — Providing a 401(k) plan can be an important asset for attracting and keeping top talent, especially in a competitive O'Fallon, 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 you offer 401(k)s to rank-and-file employees as well.
- Tax benefits — Both businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions do not surpass the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several tax credits when businesses first establish a 401(k) plan, and if the employer offers 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 eventually leads to more productivity.
- Decreased liability — Employers assume a fiduciary duty to their employees when they provide 401(k) plans, which involves a a deep level of investment knowledge and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), most of that fiduciary duty will go to them.
- Ease of administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll manage the critical tasks of employee education, compliance, and administrative responsibilities on your behalf, so you can reap the rewards of offering a plan without putting in too much work yourself. Additionally, advisors can help integrate contributions with your payroll system for further simplicity. If an employee takes a new job elsewhere, they can simply rollover their 401(k) to an IRA or new 401(k) without much hassle to you.
Types of 401(k) Plans For Your Small Business in O'Fallon, MO
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 size:
401(k) Plans
In any 401(k) plan, employees can put funds into the account through payroll deductions. 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 meet stringent nondiscrimination requirements, and undergo 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 deposit an additional $7,500 as a catch-up contribution.
O'Fallon, MO 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 at different times than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited before taxes are taken out, and the employee can then deduct the amount contributed 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 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 increasingly popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as a business owner you would be obligated to make fully vested contributions to your employees' plans. 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 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 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% annually until it reaches a maximum of 6%, unless the employee chooses 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 owner-only businesses, 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 do not require 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 establishing a 401(k) plan for your small O'Fallon, MO business, schedule an appointment with a member of our advisor team today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Small O'Fallon, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some O'Fallon, MO employers might still be wary, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. 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 partner with small business owners to develop a 401(k) plan meant expressly to benefit their company. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and managing 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 participant
A financial advisory firm can assist with all of the above requirements, and oversee the operation and annual reviews of the plan.
- Marketing your 401(k) plan to those in the job market — The word "401(k)" might show up 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 phrase "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 offer investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' funds for further growth.
- Employee education — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' employees so they're confident with the status of their retirement savings.
- Compliance — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to stiff fees. A financial advisor can help to ensure all of the proper rules are followed.
- 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 required to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers significant value to O'Fallon, MO small business owners who are looking to set up a 401(k) plan. By working 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 Set Up 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 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 O'Fallon, MO business today, call Correct Capital at 877-930-4015 or contact us online.
