401 (k) for small business in Rock Hill, MO. Initiating a 401(k) plan for your small business in Rock Hill, MO can offer numerous benefits to both employers and employees, helping businesses stand out and provide long-term financial security to their employees. In addition to attracting great employees, offering a 401(k) plan can also help both businesses and employees lower 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 regulations.
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' retirement accounts. Call Correct Capital today at 314-930-401(k) or contact us online to get started with setting up a 401(k) for your small business in Rock Hill, MO.
Do I Need a 401(k) For My Rock Hill, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Rock Hill, MO has numerous benefits, for you, your workers, and your business's bottom line:
- Attract and retain top employees — Providing retirement plans is an important asset for attracting and keeping skilled workers, particularly in a competitive Rock Hill, MO job market. One survey says 401(k) plans are the most important financial benefit to employees, 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 employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers are tax deductible up to the yearly 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 enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — A 401(k) plan allows employees to feel more confident about how they'll spend their golden years. Greater financial security ultimately leads to more productivity.
- Decreased liability — Employers assume a fiduciary duty to their employees when they provide 401(k) plans, which involves a wide range of investment understanding and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), the majority of that fiduciary duty will be placed on them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the critical tasks 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 integrate contributions with your payroll system for further simplicity. If an employee moves to a new company, 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 Rock Hill, 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:
In any 401(k) plan, employees can contribute through payroll deductions. Most 401(k)s offer many different investment options. Employers can employers can deposit an equal amount as their employees as an additional benefit to employees. Most 401(k) plans must abide by rigid nondiscrimination requirements, and are subject to yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case you can deposit an additional $7,500 as a catch-up contribution.
Rock Hill, 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 — The key difference between traditional and Roth deferrals is when your employees pay taxes on their contributions. 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 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 been contributing for at least five years and is 59-½ years old when the withdrawal is made. 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 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 decides to contribute to the plan.
- 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 decide not to. The default contribution rate starts at 3% and increases by 1% every year until it maxes out at 6%, unless the employee elects 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 people who are self-employed, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and gains 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 is more than $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 Rock Hill, MO business, schedule a meeting with one of our advisers today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Small Rock Hill, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Rock Hill, MO employers might still be cautious, as they may not have the knowledge, 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 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 work with small business owners to create a 401(k) plan meant specifically to benefit their business. They can help choose the right type of plan, 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 have to:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Develop a record keeping system
- Provide plan information to eligible employees
A financial advisory firm can assist with all of the above requirements, and oversee the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The phrase "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 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 experienced with portfolio management will be able to offer investment insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best 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 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 fees. 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 in the best interest of plan participants. We are ethically 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 considerable value to Rock Hill, 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 Rock Hill, MO
If you own a small business in Rock Hill, MO, you want to spend your energy on why you started your business – not being distracted by administrative tasks you may or may not be knowledgeable about. 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 314-930-401(k) or contact us online.