401(k) for small business in St. Charles County, MO. Establishing 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 stand out and provide a more secure to their employees. Beyond just offering more benefits than competitors, providing a 401(k) plan also provides numerous tax benefits for both employers and employees. But, some business owners may still be wary because of the time involved in setting up and operating an account, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our St. Charles County, MO financial planners 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 do the financial and administrative work for you, so you can focus on growing your business while we focus on growing your and your employees' savings. Speak to a Correct Capital team member today at 877-930-4015 or contact us online to get started with establishing a 401(k) for your small business in St. Charles County, MO.
Why You Should Up a 401(k) for Your Small St. Charles County, MO Business
Setting up and operating a 401(k) for a small business in St. Charles County, MO can do wonders for employers, your workers, and your business's bottom line:
- Attract and keep great employees — Providing retirement plans is an important tool for attracting and keeping skilled workers, particularly if many St. Charles County, MO companies are advertising for the same position. 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 deductions — Both employers and employees can reduce how much they owe in taxes 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 for first-time 401(k) plans and offering automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — A 401(k) plan allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers assume a fiduciary responsibility to their employees when they offer retirement plans, which involves a a deep level of investment savvy and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to initiate and manage your small business's 401(k), most of that fiduciary duty will go to them.
- Simple administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll manage the vast majority of employee education, compliance, and administrative tasks on your behalf, so you can enjoy the rewards of offering a plan without putting in too much work yourself. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can effortlessly rollover their 401(k) to a new retirement account without much hassle to you.
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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 payroll deductions. Most 401(k)s have a diversity of 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 stringent 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 you can contribute an additional $7,500 as a catch-up contribution.
St. Charles County, MO companies 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 at different times than with a Roth deferral. 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 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 there are no taxes when the money's withdrawn, so 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 allow employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be required to make contributions that are fully vested when made. 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 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 automatic contribution rate starts at 3% and increases by 1% every year until it reaches a maximum of 6%, unless the employee elects 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 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 are not subject to annual filings with the IRS unless the account balance surpasses $250,000.
The "best" plan for your will depend on your business and employees. If you're thinking of establishing a 401(k) plan for your small St. Charles County, MO business, schedule an appointment with one of our advisers today to get started.
How a Financial Advisor Can Help Small St. Charles County, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some St. Charles County, MO employers might still be uneasy, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some some of the many ways that a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A handful of quick internet searches can't come close to providing the same level 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 plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and managing a plan — There are specific steps you must take when initiating your small business 401(k). You must:
- 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 manage the operation and yearly reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might show up 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 term "401(k)" to definite steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to provide investment insight, as well as work within investment concepts 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 talk directly to your small business's employees so they're confident with how their money is being held and invested.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to harsh penalties. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are morally and legally mandated 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 St. Charles County, 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 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 St. Charles County, MO
If you own a small business in St. Charles County, MO, you want to spend your time on what you do best and what you're passionate about – not being distracted by administrative tasks 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 St. Charles County, MO business today, call Correct Capital at 877-930-4015 or contact us online.
