401(k) for small business in St. Charles, MO. Initiating a 401(k) plan for your small business in St. Charles, MO provides 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. In addition to attracting top talent, providing a 401(k) plan can also help both businesses and employees reduce their tax liability. However, some business owners might not be confident they want to proceed because of the time involved in establishing and maintaining an account, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our St. Charles, MO financial advisors and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We take the heavy financial lifting off your plate, 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, MO.
Why You Should Up a 401(k) for Your Small St. Charles, MO Business
Establishing and maintaining a 401(k) for a small business in St. Charles, MO has numerous benefits, for employers, your workers, and your business's bottom line:
- recruit and keep top employees — Offering a 401(k) plan is an important asset for attracting and retaining accomplished workers, especially if many St. Charles, MO companies are advertising for the same job. Some employees will even quit their job over a 401(k), and offering one can help differentiate your business from competitors, especially if they are offered to people beyond the highest earners.
- Tax deductions — Both businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions employers make are tax deductible up to the annual corporate tax deduction limit on employer contributions, as stipulated in section 404 of the Internal Revenue Code. The federal government also offers tax credits when employers first set up a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their taxable income and their contributions grow tax free.
- Increased employee retirement savings — A 401(k) plan allows employees to feel better about how they'll live in retirement. Greater financial security eventually leads to more productivity.
- Decreased liability — Employers take on a fiduciary duty to their employees when they provide 401(k) plans, which involves a a deep level of investment comprehension and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to initiate and operate your small business's 401(k), most of that liability will be placed on them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the vast majority of employee education, compliance, and administrative responsibilities for you, so you can benefit from the rewards of offering a plan without putting in too much work yourself. In addition, advisors can help integrate contributions with your payroll system for further simplicity. If an employee takes a new job elsewhere, they can easily perform a 401(k) rollover to an IRA or new 401(k) without you having to do much work.
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. 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 put funds into the account through payroll deductions. Most 401(k)s have many different 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 meet rigid nondiscrimination requirements, and undergo yearly tests to ensure they remain compliant. The IRS mandates contribution limits each year; in 2023 the limit is $22,500, unless you turn 50 or older this year, in which case you can contribute an additional $7,500 as a catch-up contribution.
St. Charles, 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 — The key difference between traditional and Roth deferrals is the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited before taxes are taken out, lowering an employee's 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 the savings and any gains can be withdrawn tax-free, 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 allow plan participants to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner you would be obligated 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 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 default contribution rate starts at 3% and increases by 1% each 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 are meant for people who are self-employed, or a business where the only employee is a spouse. Contributions are tax deductible and the money is taxed when it's withdrawn. This allows participants to save more as they can make contributions both as a worker and an employer. Unlike other 401(k) plans, individual 401(k)s are not subject to 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 employees. If you're considering opening a 401(k) plan for your small St. Charles, MO business, schedule a meeting with one of our advisers today to find out 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
Given the great things a 401(k) plan can do for a small business, some St. Charles, MO employers may still be uneasy, as they may not have the know-how, time, or interest to establish and operate a plan. 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 handful of detailed Google searches can't come close to providing the same degree of skill and experience as a professional retirement consultant. Financial advisors can work with small business owners to design 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.
- Setting up 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 participant
A financial advisory firm can do all of that for you, and oversee the operation and annual reviews of your 401(k).
- Marketing your 401(k) plan to prospective employees — The phrase "401(k)" might show up on a job ad 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 definite steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are qualified to perform portfolio management will be able to offer 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 help them. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' employees so they're confident with the status of their retirement savings.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to harsh fines. 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 responsibility to act in the best interest of their employees. We are ethically and legally bound to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor offers remarkable value to St. Charles, MO small business owners who are looking to set up 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 focus on what you do best and what you're passionate about – not being bogged down 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.
