401(k) for small business in Rock Hill, MO. Establishing a 401(k) plan for your small business in Rock Hill, MO provides various benefits to both you and the people that work for you, helping businesses offer more security and benefits to prospective employees. Beyond just attracting top talent, providing a 401(k) plan can also help both businesses and employees lower their tax liability. However, some business owners might not be sure if they want to move forward because of the time involved in setting up and operating a plan, as well as the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Rock Hill, MO financial advisors and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We take the heavy financial lifting off your plate, so you can focus on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 877-930-4015 or complete our online form to get started with creating a 401(k) for your small business in Rock Hill, MO.
Should I Establish a 401(k) For My Rock Hill, MO Small Business?
Setting up and operating a 401(k) for a small business in Rock Hill, MO can do wonders for you, your workers, and your business goals alike:
- Attract and retain great employees — Providing a 401(k) plan can be an essential tool for attracting and retaining top talent, especially in a competitive Rock Hill, MO job market. Employees see a 401(k) as a valuable benefit, and offering one can help differentiate your business from competitors, especially if they are offered to people beyond the highest earners.
- Tax benefits — Both businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions from employers 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. The federal government also offers tax credits for first-time 401(k) plans and offering automatic enrollment. Employees can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — 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.
- Reduced liability — Employers owe a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a wide range of investment understanding and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to initiate and manage your small business's 401(k), much of that fiduciary duty will go to them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll handle the vast majority of employee education, compliance, and administrative duties on your behalf, so you can benefit from the rewards of offering a plan without much nuisance. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, 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 Rock Hill, MO?
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. However many employees you have, there is a 401(k) plan that will work for you:
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 investment options. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must follow strict nondiscrimination requirements, and are subject to annual 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 turn 50 or older this year, in which case the limit is $30,000.
Rock Hill, MO businesses 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 it is pre-tax money, 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 money the employee's already paid taxes on, meaning the money grows tax-free and there are no taxes when the money's withdrawn, so 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 allow plan participants 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. To meet Safe Harbor requirements, you have four possible ways to 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 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 have a part of their pay contributed to the plan unless they decide not to. The default contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 6%, unless the employee decides on 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
These are are meant for people who are self-employed, or businesses where the only employees are spouses. Contributions are tax deductible and gains grow tax-deferred until withdrawn. This allows participants to save more as they can make contributions both as an employee and a businesses owner. 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 your and your employees' needs. If you're interested in setting up a 401(k) plan for your small Rock Hill, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Your Rock Hill, MO Small Business With Your 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Rock Hill, MO employers might still be uneasy, as they may not have the know-how, time, or interest to establish and operate a plan. That’s where a financial advisor can help. Here are some ways that our advisory firm 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 level of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to design a 401(k) plan that meets the specific needs of their business and employees. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and managing a plan — There are numerous requirements you must adhere to when establishing 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and manage the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to prospective employees — 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 words "401(k)" to definite steps to people living the golden years of their dreams.
- 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 best 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 can speak directly to your small business's employees so they're confident with the status of their retirement savings.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following them 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 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 can provide remarkable value to Rock Hill, 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 Rock Hill, MO
If you own a small business in Rock Hill, MO, you want to focus on why you started your business – not being distracted 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 Rock Hill, MO business today, call Correct Capital at 877-930-4015 or contact us online.
