401(k) for small business in St. Clair County, IL. Initiating a 401(k) plan for your small business in St. Clair County, IL provides various benefits to both you and the people that work for you, helping businesses stand out and provide a more secure to their employees. In addition to offering more benefits than competitors, offering a 401(k) plan can also help both businesses and employees lower their tax liability. However, some business owners might not be sure if they want to move forward because of the time commitment, in addition to the complex web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our St. Clair County, IL financial advisors and retirement consultants help companies of all sizes offer 401(k) plans that fit what their business needs and what their employees want. We do most of the work for you, so you can focus on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 877-930-4015 or complete our online form to learn more about creating a 401(k) for your small business in St. Clair County, IL.
Should I Establish a 401(k) For My St. Clair County, IL Small Business?
Establishing and maintaining a 401(k) for a small business in St. Clair County, IL can do wonders for employers, your workers, and your business's bottom line:
- Attract and keep great employees — Providing retirement plans can be a valuable tool for attracting and retaining accomplished workers, particularly in a competitive St. Clair County, IL job market. 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 management.
- Tax deductions — Both businesses 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 are not more than the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. The federal government also offers tax credits when businesses 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 retirement account allows employees to feel better about how they'll live in retirement. Greater financial security ultimately leads to more productivity.
- Decreased liability — Employers assume a fiduciary duty to their employees when they offer 401(k) plans, which involves a wide range of investment knowledge and responsibilities. If you work with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), the bulk of that fiduciary duty will be passed onto them.
- Simple administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll manage the critical tasks of employee education, compliance, and administrative tasks on your behalf, so you can reap the rewards of offering a plan without putting in too much work yourself. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, they can simply rollover their 401(k) to a new retirement account without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in St. Clair County, IL?
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 put savings into the account through money taken out of their paychecks. Most 401(k)s offer a diversity of investment opportunities. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must abide by rigid nondiscrimination requirements, and perform annual tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case the limit is $30,000.
St. Clair County, IL 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 money is deposited before taxes are taken out, 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 the savings and any gains can be withdrawn tax-free, 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 decrease tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be required to make contributions that are fully vested when made. To meet Safe Harbor requirements, you have four options:
- 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 have a portion of their pay contributed to the plan unless they choose to opt out or contribute a different amount. The automatic contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 6%, unless the employee chooses 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 are tax deductible and gains 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 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 interested in setting up a 401(k) plan for your small St. Clair County, IL business, schedule a meeting with a member of our advisor team today to get started.
How a Financial Advisor Can Help Your St. Clair County, IL Small Business With Your 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some St. Clair County, IL 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 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 everyday interaction with retirement plans. Financial advisors can work with small business owners to create 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 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 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 word "401(k)" might appear 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 phrase "401(k)" to definite steps to people living the golden years they always wanted.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in 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' funds 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 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 accidentally fail to comply with a requirement.
- Fiduciary duty — When offering a retirement plan, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are ethically and legally mandated to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor can provide considerable value to St. Clair County, IL small business owners who are looking to set up a 401(k) plan. By partnering 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 Establish 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 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. Clair County, IL business today, call Correct Capital at 877-930-4015 or contact us online.
