401 (k) for small business in Richmond Heights, MO. Setting up 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 a more secure to their employees. Beyond just attracting top talent, providing a 401(k) plan also affords numerous tax benefits for both employers and employees. However, some business owners might not be sure if they want to proceed because of the time commitment, as well as the complexities of investment and financial regulations.
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 their business and provide stability for their employees. We take the heavy financial lifting off your plate while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or complete 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
Establishing and operating a 401(k) for a small business in Richmond Heights, MO has numerous benefits, for employers, your employees, and your business's bottom line:
- recruit and keep great talent — Offering a 401(k) plan can be an essential asset for recruiting and retaining top talent, especially in a competitive Richmond Heights, MO job market. Some employees will even quit their job over a 401(k), and offering one can help differentiate your business from competitors, 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 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. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased financial security for employees — A 401(k) plan allows employees to feel more confident about how they'll live in retirement. Greater financial security eventually leads to a more productive workforce.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they provide 401(k) plans, which involves a a deep level of investment comprehension and obligations. If you work with an ERISA 3(38) Fiduciary provider to initiate and operate your small business's 401(k), much of that liability will go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage 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 nuisance. Moreover, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new company, they can simply perform a 401(k) rollover to an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Richmond Heights, 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 how many employees they have:
401(k) Plans
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s offer many different investment opportunities. Employers can employers can deposit an equal amount as their employees as an added benefit to employees. Most 401(k) plans must meet strict nondiscrimination requirements, and are subject to yearly tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case you can deposit an additional $7,500 as a catch-up contribution.
Richmond Heights, 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 — 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, lowering an employee's 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, 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 decide to set up a Safe Harbor 401(k), as an employer 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 have a percentage of their pay contributed to the plan unless they choose to opt out or contribute a different amount. The default contribution rate starts at 3% and increases by 1% every year until it reaches a maximum of 6%, unless the employee decides on 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
These are intended for people who are self-employed, or a business where the only employee is a spouse. 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 are not subject to annual filings with the IRS unless the account balance is more than $250,000.
The "best" plan for your will depend on your business and employees. If you're interested in establishing a 401(k) plan for your small Richmond Heights, MO business, make an appointment with one of our advisers today to find out more about the benefits and options available to you.
How a Financial Advisor Can Help Your Richmond Heights, MO Small Business With Your 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Richmond Heights, MO employers might still be wary, as they may not have the know-how, time, or interest to establish and operate a plan. That’s where we come in. Here are some some of the many 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 quick internet searches can't come close to offering the same degree of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to develop 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.
- Setting up and managing a plan — There are numerous requirements you must adhere to 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 participant
A financial advisory firm can assist with all of the above requirements, and manage 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 listing as a bullet point, but many in the job market don't fully understand what a 401(k) entails. We can bridge the term "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 well versed in portfolio management will be able to offer market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' money for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will benefit them. At Correct Capital, we can speak directly to your small business's employees so feel good about with how their money is being held and invested.
- Compliance — Employers must adhere to various rules and contribution limits when offering a 401(k) plan. Not following them can lead to stiff fines. 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 duty to act with diligence, prudence, and care. We are ethically 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 offers considerable value to Richmond Heights, MO small business owners who want to experience the benefits of 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 Start a 401(k) For Your Small Business in Richmond Heights, MO
If you own a small business in Richmond Heights, MO, you want to spend your energy 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 Richmond Heights, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
