401(k) for small business in Sappington, MO. Setting up a 401(k) plan for your small business in Sappington, MO can offer various benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. Beyond just offering more benefits than competitors, offering a 401(k) plan also provides numerous tax benefits for both employers and employees. However, some business owners might not be confident they want to proceed because of the time commitment, as well as the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Sappington, MO financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We take the heavy financial lifting off your plate while you focus on making your business thrive. Call Correct Capital today at 314-930-401(k) or contact us online to get started with creating a 401(k) for your small business in Sappington, MO.
Do I Need a 401(k) For My Sappington, MO Small Business?
Establishing and operating a 401(k) for a small business in Sappington, MO can do wonders for you, your workers, and your business goals alike:
- recruit and keep top talent — Offering retirement plans can be an important tool for attracting and keeping accomplished talent, especially if many Sappington, MO companies are hiring for the same position. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if they are offered to people beyond the highest earners.
- Tax deductions — Both businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make are tax deductible up to 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. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased financial security for employees — A retirement account allows employees to feel better about how they'll live in retirement. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers assume a fiduciary duty to their employees when they provide 401(k) plans, which involves a a deep level of investment understanding 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 be passed onto them.
- Ease of administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the critical tasks of employee education, compliance, and administrative responsibilities for you, so you can reap the rewards of offering a plan without much nuisance. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can simply rollover their 401(k) to a new retirement account without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Sappington, 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 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 added benefit to employees. Most 401(k) plans must meet strict nondiscrimination requirements, and undergo annual 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 the limit is $30,000.
Sappington, MO businesses with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The key difference between traditional and Roth deferrals is the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited before taxes are taken out, and the employee can then deduct the amount deposited from their taxable income. When the money is withdrawn it is taxed as ordinary income at the employee'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 there are no taxes when the money's withdrawn, as long as the plan participant has had the account for 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 obligated to make fully vested contributions to your employees' accounts. 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, regardless of whether the employee chooses 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 choose to opt out or contribute a different amount. The default contribution rate starts at 3% and increases by 1% annually until it maxes out at 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 are meant for people who are self-employed, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and savings grow tax-deferred until the money is taken out. 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 surpasses $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 setting up a 401(k) plan for your small Sappington, MO business, schedule a meeting with one of our advisers today to discover more about the benefits and options available to you.
How a Financial Advisor Can Help Small Sappington, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Sappington, 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 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 degree of skill and experience as a licensed advisory firm. Financial advisors can partner 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 right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and operating 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 eligible employees
A financial advisory firm can do all of that for you, and oversee the operation and yearly reviews of the plan.
- Marketing your 401(k) plan to prospective employees — The term "401(k)" might appear on a job listing as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. We can bridge the words "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 experienced with portfolio management will be able to offer market 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 — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we can talk directly to your small business's employees so feel at ease 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 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 responsibility 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 savings.
A financial advisor can provide significant value to Sappington, MO small business owners who want to experience the benefits of a 401(k) plan. By consulting 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 Start a 401(k) For Your Small Business in Sappington, MO
If you own a small business in Sappington, MO, you want to spend your time 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 Sappington, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
