401(k) for small business in St. Charles County, MO. Creating a 401(k) plan for your small business in St. Charles County, MO can offer various benefits to both you and the people that work for you, helping businesses offer more security and benefits to people in the job market. Beyond just attracting top talent, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. However, some business owners may still be wary because of the time commitment, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our St. Charles County, MO financial advisors 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 take the heavy financial lifting off your plate, so you can spend your energy on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-4015 or contact us online to get started with establishing a 401(k) for your small business in St. Charles County, MO.
Benefits of Setting Up a 401(k) for Your Small St. Charles County, MO Business
Establishing and operating a 401(k) for a small business in St. Charles County, MO can do wonders for employers, your employees, and your business goals alike:
- recruit and keep great employees — Providing retirement plans is an essential tool for recruiting and retaining high-performing workers, particularly in a competitive St. Charles County, MO job market. Employees see a 401(k) as a valuable benefit, and offering one can help your business stand out, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax deductions — Both employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions are not more than the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. The federal government also offers tax credits when companies first establish a 401(k) plan, and if the employer offers automatic enrollment. Employees enjoy 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 ultimately leads to more productivity.
- Decreased liability — Employers assume a fiduciary responsibility to their employees when they offer retirement plans, which involves a wide range of investment understanding and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to set up and manage your small business's 401(k), much of that fiduciary duty will go to them.
- Ease of administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll handle the vast majority of employee education, compliance, and administrative duties for you, so you can benefit from the rewards of offering a plan without much nuisance. Furthermore, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new job elsewhere, they can simply rollover their 401(k) to an IRA or new 401(k) without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in St. Charles County, MO?
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. 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 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 follow rigid nondiscrimination requirements, and perform 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 are 50 or older, in which case you can contribute an additional $7,500 as a catch-up contribution.
St. Charles County, 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 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. 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 been contributing for at least 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 a business owner 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, regardless of whether 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 automatic 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.
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 a business where the only employee is a spouse. Contributions are tax deductible and gains 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 are not subject to 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 employees. If you're considering setting up a 401(k) plan for your small St. Charles County, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Small St. Charles County, MO Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some St. Charles County, MO employers might still be wary, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some ways that a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A few detailed Google searches are a poor replacement for years of experience and everyday interaction with retirement plans. Financial advisors can work 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 plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and managing a plan — There are numerous requirements you must follow when beginning 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 do all of that for you, and handle the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The word "401(k)" might appear on a job listing in a list of benefits, but many in the job market don't fully understand what a 401(k) can do for them. We can bridge the term "401(k)" to definite 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 investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to best position employees' money 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 feel at ease with how their money is being held and invested.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to stiff penalties. 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 morally and legally required to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor offers significant value to St. Charles County, MO small business owners who are looking to create a 401(k) plan. By working 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 St. Charles County, MO
If you own a small business in St. Charles County, MO, you want to focus on what you do best and what you're passionate about – not being distracted by retirement plan responsibilities 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 St. Charles County, MO business today, call Correct Capital at 314-930-4015 or contact us online.
