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 stand out and provide long-term financial security to their employees. Beyond just attracting great employees, offering a 401(k) plan also affords numerous tax benefits for both employers and employees. But, some business owners may still be cautious because of the time involved in establishing and maintaining an account, as well as the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our St. Charles, 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 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' retirement accounts. Call Correct Capital today at 877-930-4015 or contact us online to get started with setting up 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 you, your workers, and your business goals alike:
- Attract and retain great talent — Offering retirement plans can be a valuable asset for attracting and retaining accomplished talent, particularly in a competitive St. Charles, MO job market. One survey says 401(k) plans are the most important financial benefit to employees, 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 benefit from tax advantages with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions do not surpass the yearly 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 can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — A 401(k) plan allows employees to feel more confident about how they'll spend their golden years. Greater financial security eventually leads to a more productive workforce.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a a deep level of investment savvy and obligations. If you work with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), most of that liability 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 critical tasks of employee education, compliance, and administrative tasks for you, so you can benefit from the rewards of offering a plan without putting in too much work yourself. Furthermore, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new company, they can effortlessly 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, MO?
Depending on what industry you're in, your "small business" may have up to 1,500 employees, or it may just be yourself. 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 added perk to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and undergo annual 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, 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 the contributions are made before taxes are taken out, lowering an employee's taxable income. Taxes are paid when the money is withdrawn.
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 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 obligated to make fully vested contributions to your employees' accounts. There are four ways in which an employer can contribute:
- In a non-elective contribution, an employer must contribute 3% of each eligible employee's compensation to the plan, whether or not the employee decides 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 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 decides on 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 are meant for people who are self-employed, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and earnings 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 exceeds $250,000.
What plan works best for your and your employees depends on your business and employees. If you're interested in establishing a 401(k) plan for your small St. Charles, 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 St. Charles, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some St. Charles, 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 a financial advisor can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few quick internet searches are a poor replacement for years of experience and working on retirement plans every day. Financial advisors can partner with small business owners to develop a 401(k) plan meant expressly to benefit their business. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and operating a plan — There are specific steps you must take when establishing your small business 401(k). You must:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Establish a record keeping system
- Provide plan information to participant
A financial advisory firm can do all of that for you, and handle the operation and yearly reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The phrase "401(k)" might appear on a job listing in a list of benefits, but many in the job market don't know the full benefits a plan provides. 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 qualified to perform portfolio management will be able to provide market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to best position employees' savings for further growth.
- Employee education — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' 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 the rules correctly 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 duty to act in the best interest of plan participants. We are ethically and legally obligated to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor can provide remarkable value to St. Charles, MO small business owners who are looking to set up a 401(k) plan. By working 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, MO
If you own a small business in St. Charles, 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 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, MO business today, call Correct Capital at 877-930-4015 or contact us online.
