401(k) for small business in Olivette, MO. Initiating a 401(k) plan for your small business in Olivette, MO provides various benefits to both you and the people that work for you, helping businesses stand out and provide a more secure to their employees. Beyond just offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners might not be sure if they want to proceed because of the time commitment, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Olivette, MO financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do the financial and administrative work for you while you focus on making your business flourish. Speak to a Correct Capital team member today at 877-930-4015 or contact us online to get started with establishing a 401(k) for your small business in Olivette, MO.
Why You Should Up a 401(k) for Your Small Olivette, MO Business
Establishing and operating a 401(k) for a small business in Olivette, MO has numerous benefits, for employers, your employees, and your business's bottom line:
- recruit and retain top employees — Offering retirement plans can be an important tool for recruiting and retaining accomplished talent, especially in a competitive Olivette, 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 employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions are not more than 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 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 a more productive workforce.
- Decreased liability — Employers take on a fiduciary duty to their employees when they offer retirement plans, which involves a wide range 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), much of that fiduciary duty will go to them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll handle the critical tasks of employee education, compliance, and administrative duties for you, so you can reap the rewards of offering a plan without much nuisance. In addition, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can effortlessly perform a 401(k) rollover to an IRA or new 401(k) without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Olivette, 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:
401(k) Plans
In any 401(k) plan, employees can contribute through payroll deductions. Most 401(k)s have a wide range of investment opportunities. Employers can employers can deposit an equal amount as their employees as an additional perk to employees. Most 401(k) plans must adhere to stringent nondiscrimination requirements, and are subject to annual tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Olivette, MO employers 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 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, 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 the savings and any gains can be withdrawn tax-free, so 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 increasingly popular as they allow employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be required to make fully vested contributions to your employees' accounts. 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 choose to opt out or contribute a different amount. 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 company 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 businesses where the only employees are spouses. Contributions are tax deductible and savings 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 do not require annual filings with the IRS unless the account balance exceeds $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 Olivette, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Small Olivette, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Olivette, MO employers might still be uneasy, as they may not have the knowledge, time, or interest to establish and operate a plan. 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 handful of quick internet searches can't come close to providing the same level of skill and experience as a licensed advisory firm. Financial advisors can partner with small business owners to develop a 401(k) plan meant specifically to benefit their business. They can help choose the plan that most benefits 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 initiating 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 do all of that for you, and manage the operation and annual reviews of your 401(k).
- Marketing your 401(k) plan to prospective employees — 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 bridge the term "401(k)" to specific steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in 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 — The more an employee understands their 401(k) plan, the more it will benefit them. 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 harsh penalties. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are ethically and legally bound to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor offers significant value to Olivette, 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 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 Olivette, MO
If you own a small business in Olivette, 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 Olivette, MO business today, call Correct Capital at 877-930-4015 or contact us online.
