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 offers numerous tax benefits for both employers and employees. But, some business owners might not be confident they want to proceed because of the time commitment, as well as the complexities of investment and financial laws.
At Correct Capital Wealth Management, our St. Charles County, MO financial planners and retirement consultants work with companies large and small to offer customized and successful 401(k) plans. We take the heavy financial lifting off your plate while you focus on making your business flourish. Call Correct Capital today at 314-930-401(k) or complete our online form to get started with creating a 401(k) for your small business in St. Charles County, MO.
Should I Establish a 401(k) For My St. Charles County, MO Small Business?
Setting up and maintaining a 401(k) for a small business in St. Charles County, MO has numerous benefits, for employers, your workers, and your business goals alike:
- Attract and keep top talent — Providing retirement plans is an important asset for attracting and retaining top talent, especially if many St. Charles County, MO companies are hiring for the same job. 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 ranking employees.
- 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. There are also several 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 employee retirement savings — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they provide 401(k) plans, which involves a a deep level of investment savvy and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to set up and manage your small business's 401(k), the majority of that fiduciary duty will be passed onto them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the lion's share of employee education, compliance, and administrative duties for you, so you can benefit from the rewards of offering a plan without putting in too much work yourself. Moreover, 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 a new retirement account without much hassle to you.
Types of 401(k) Plans For Your Small Business in St. Charles County, 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 a wide range of investment options. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must adhere to strict nondiscrimination requirements, and perform yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, in which case you can deposit 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 main difference between traditional and Roth deferrals is the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, 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, 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 increasingly popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be required to make fully vested contributions to your employees' plans. 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 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 money is taken out of their paycheck unless they decide not to. The automatic contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 6%, unless the employee elects a different contribution rate.
Because you are required to make contributions, your business would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are intended for owner-only businesses, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and the money is taxed when it's 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 exceeds $250,000.
What plan works best for your and your employees depends on your business and your and your employees' needs. If you're thinking of opening a 401(k) plan for your small St. Charles County, MO business, schedule a meeting with a member of our team today to find out more about the benefits and options available to you.
How a Financial Advisor Can Help Your St. Charles County, MO Small Business With Your 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some St. Charles County, MO employers might 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 some of the many ways that a financial advisor can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few detailed Google 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 meant expressly to benefit their company. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and operating a plan — There are numerous requirements you must follow 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 assist with all of the above requirements, and handle the operation and annual reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The phrase "401(k)" might show up on a job listing as a bullet point, but many in the job market don't know the full benefits a plan provides. We can connect the term "401(k)" to specific steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are qualified to perform portfolio management will be able to offer market 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 — The more an employee understands their 401(k) plan, the more it will benefit them. At Correct Capital, we can speak directly to your small business's 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 fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are ethically and legally obligated 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 St. Charles County, MO small business owners who are looking to create 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 Set Up 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 energy on what you do best and what you're passionate about – 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 St. Charles County, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
