401 (k) for small business in St. Clair County, IL. Creating a 401(k) plan for your small business in St. Clair County, IL can offer various 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 top talent, providing a 401(k) plan can also help both businesses and employees lower their tax liability. However, some business owners may still be wary because of the time involved in establishing and maintaining an account, in addition to the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our St. Clair County, IL financial advisors and retirement consultants help companies of all sizes offer customized and successful 401(k) plans. We do the financial and administrative work for you, so you can spend your energy on growing your business while we focus on growing your and your employees' retirement accounts. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to learn more about setting up a 401(k) for your small business in St. Clair County, IL.
Why You Should Up a 401(k) for Your Small St. Clair County, IL Business
Establishing and operating a 401(k) for a small business in St. Clair County, IL can do wonders for you, your employees, and your business goals alike:
- recruit and keep top talent — Providing retirement plans is an important tool for attracting and retaining top talent, particularly if many St. Clair County, IL companies are advertising for the same job. 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 they are offered to people beyond the highest ranking employees.
- Tax deductions — Both businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers 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. There are also several tax credits when employers first establish a 401(k) plan, and if the employer offers 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.
- Reduced liability — Employers take on a fiduciary responsibility to their employees when they offer retirement plans, which involves a wide range of investment comprehension and obligations. If you work with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), much of that fiduciary duty will be passed onto them.
- Ease of administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the lion's share of employee education, compliance, and administrative duties on your behalf, so you can enjoy the rewards of offering a plan without putting in too much work yourself. Additionally, 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 you having to do much work.
Types of 401(k) Plans That Can Help Your Small Business in St. Clair County, IL
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:
In any 401(k) plan, employees can put funds into the account through payroll deductions. Most 401(k)s offer a diversity of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an added perk to employees. Most 401(k) plans must adhere to strict nondiscrimination requirements, and perform annual tests to ensure they remain compliant. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case you can deposit an additional $7,500 as a catch-up contribution.
St. Clair County, IL employers 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 when your employees pay taxes on their contributions. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited 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 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, as long as the plan participant has been contributing for at least five years and is 59-½ years old when the withdrawal is made. 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 contributions that are fully vested when made. 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 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 part of their pay contributed to the plan unless they decide not to. The automatic contribution rate starts at 3% and increases by 1% every year until it maxes out at 6%, unless the employee decides on 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
Solo and Individual 401(k) plans are intended for people who are self-employed, or a business where the only employee is a spouse. Contributions can be deducted from taxable income 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 an employer. Unlike other 401(k) plans, individual 401(k)s do not require 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 considering setting up a 401(k) plan for your small St. Clair County, IL business, make an appointment with a member of our advisor team today to get started.
How a Financial Advisor Can Help Small St. Clair County, IL Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some St. Clair County, IL employers might still be uneasy, as they may not have the knowledge, time, or interest to establish and operate a plan. That’s where a financial advisor can help. 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 few quick internet searches are a poor replacement for decades of experience and everyday interaction with retirement plans. 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 works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and operating a plan — There are numerous requirements you must adhere to when beginning 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 do all of that for you, and manage the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The word "401(k)" might appear on a job ad as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. We can bridge the phrase "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 provide investment insight, as well as work within investment concepts 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 speak directly to your small business's employees so they're confident 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 harsh fines. 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 morally and legally bound to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers significant value to St. Clair County, IL 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. Clair County, IL
If you own a small business in St. Clair County, IL, you want to spend your energy on why you started your business – not being bogged down 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. Clair County, IL business today, call Correct Capital at 314-930-401(k) or contact us online.