401 (k) for small business in St. Charles, MO. Creating a 401(k) plan for your small business in St. Charles, MO provides numerous benefits to both you and the people that work for you, helping businesses offer more security and benefits to prospective employees. Beyond just offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. However, some business owners may still be cautious because of the time commitment, in addition to the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our St. Charles, MO financial advisors and retirement consultants help companies of all sizes offer 401(k) plans that fit their business and provide stability for their employees. We do most of the work for you while you focus on your business. Call Correct Capital today at 314-930-401(k) or fill out our online form to get started with establishing a 401(k) for your small business in St. Charles, MO.
Benefits of Setting Up a 401(k) for Your Small St. Charles, MO Business
Establishing and operating a 401(k) for a small business in St. Charles, MO can do wonders for employers, your employees, and your business goals alike:
- Attract and retain great employees — Offering a 401(k) plan is an essential asset for attracting and retaining high-performing employees, particularly if many St. Charles, MO companies are advertising 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 management.
- Tax benefits — Both businesses and employees can reduce their tax liability with a 401(k) plan. Matching contributions employers make are tax deductible up to the yearly corporate tax deduction limit on employer contributions, as laid out in section 404 of the Internal Revenue Code. There are also several tax credits when employers first establish a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased employee retirement savings — 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.
- Reduced liability — Employers assume a fiduciary duty to their employees when they offer retirement plans, which involves a a deep level of investment knowledge and obligations. If you work with an ERISA 3(38) Fiduciary provider to establish and manage your small business's 401(k), the majority of that liability will be passed onto them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll take care of 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 with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can effortlessly perform a 401(k) rollover to a new retirement account without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in St. Charles, 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:
In any 401(k) plan, employees can contribute through payroll deductions. Most 401(k)s have a wide range of investment opportunities. Employers can employers can deposit an equal amount as their employees as an added perk to employees. Most 401(k) plans must adhere to stringent nondiscrimination requirements, and are subject to annual tests to ensure the plan doesn't favor highly compensated employees. 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.
St. Charles, 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 main difference between traditional and Roth deferrals is the tax benefits. 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 contributed 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 after-tax dollars, 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 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 a business owner 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 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 reaches a maximum of 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
These are are meant for owner-only businesses, or businesses where the only employees are spouses. Contributions are tax deductible and the money is taxed when it's withdrawn. This allows participants to make higher contributions as they can make contributions both as a worker and a businesses owner. 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 your and your employees' needs. If you're interested in setting up a 401(k) plan for your small St. Charles, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Your St. Charles, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some St. Charles, MO employers may still be cautious, as they may not have the knowledge, time, or interest to establish and operate a plan. That’s where we come in. Here are some some of the many ways that our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A handful of 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 meant expressly to benefit their business. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing a plan — There are specific steps you must take when initiating 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 handle the operation and annual reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The phrase "401(k)" might appear on a job ad as a bullet point, but many in the job market don't know the full benefits a plan provides. We can connect the phrase "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 experienced with portfolio management will be able to offer investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' savings 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 feel at ease with the status of their retirement savings.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. Not following them can lead to stiff penalties. 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 required to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor can provide considerable value to St. Charles, 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 Set Up a 401(k) For Your Small Business in St. Charles, MO
If you own a small business in St. Charles, MO, you want to spend your time 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, MO business today, call Correct Capital at 314-930-401(k) or contact us online.