401(k) for small business in Richmond Heights, MO. Initiating a 401(k) plan for your small business in Richmond Heights, MO can offer various benefits to both employers and employees, helping businesses stand out and provide long-term financial security 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 may still be wary because of the time commitment, in addition to the complex web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Richmond Heights, MO financial planners and retirement consultants work with companies large and small to offer 401(k) plans that fit what their business needs and what their employees want. We do most of the work for you while you focus on making your business flourish. Call Correct Capital today at 314-930-401(k) or fill out our online form to get started with setting up a 401(k) for your small business in Richmond Heights, MO.
Benefits of Setting Up a 401(k) for Your Small Richmond Heights, MO Business
Setting up and operating a 401(k) for a small business in Richmond Heights, MO has numerous benefits, for you, your employees, and your business's bottom line:
- recruit and retain great talent — Offering a 401(k) plan can be a valuable tool for attracting and retaining accomplished employees, particularly in a competitive Richmond Heights, MO job market. Some employees will even quit their job over a 401(k), 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 reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not exceed the yearly corporate tax deduction limit on employer contributions, as defined in section 404 of the Internal Revenue Code. The federal government also offers 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 a more productive workforce.
- Reduced liability — Employers assume a fiduciary responsibility to their employees when they provide retirement plans, which involves a wide range of investment knowledge and obligations. If you work with an ERISA 3(38) Fiduciary advisor 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 establish your small business 401(k) plan, they'll manage the lion's share of employee education, compliance, and administrative tasks on your behalf, so you can benefit from the rewards of offering a plan without putting in too much work yourself. In addition, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, they can simply perform a 401(k) rollover to a new retirement account without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Richmond Heights, 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:
In any 401(k) plan, employees can put savings into the account through payroll deductions. Most 401(k)s have a diversity of 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 undergo yearly tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Richmond Heights, MO businesses with multiple employees have a few different considerations to make 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, and the employee can then deduct the amount contributed from their taxable income. When the money is withdrawn it is taxed as ordinary income at the plan participant'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 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 reduce 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. To meet Safe Harbor requirements, you have four options:
- In a non-elective contribution, an employer must contribute 3% of each eligible employee's compensation to the plan, whether or not the employee decides 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 automatic contribution rate starts at 3% and increases by 1% each year until it maxes out at 6%, unless the employee elects a different contribution rate.
In exchange for obligatory employer contributions, Safe Harbor plans are not 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 businesses where the only employees are spouses. Contributions are tax deductible 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 interested in opening a 401(k) plan for your small Richmond Heights, MO business, schedule a meeting with a member of our advisor team today to discover more about the benefits and options available to you.
How a Financial Advisor Can Help Small Richmond Heights, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Richmond Heights, MO employers may 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 can't come close to providing the same degree of skill and experience as a licensed advisory firm. 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 plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing a plan — There are numerous requirements you must follow when establishing your small business 401(k). You must:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Develop a record keeping system
- Provide plan information to participant
A financial advisory firm can do all of that for you, and handle the operation and annual reviews of your 401(k).
- Marketing your 401(k) plan to potential employees — The word "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 connect the phrase "401(k)" to specific steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are qualified to perform portfolio management will be able to provide 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 feel good about with how their money is being held and invested.
- Compliance — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to stiff fines. 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 bound to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers considerable value to Richmond Heights, 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 potential employees.
Call Correct Capital to Set Up a 401(k) For Your Small Business in Richmond Heights, MO
If you own a small business in Richmond Heights, MO, you want to focus 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 Richmond Heights, MO business today, call Correct Capital at 314-930-401(k) or contact us online.