401(k) for small business in St. Clair County, IL. Setting up a 401(k) plan for your small business in St. Clair County, IL can offer numerous benefits to both employers and employees, helping businesses offer more security and benefits to prospective employees. In addition to 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 wary because of the time commitment, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our St. Clair County, IL financial planners and retirement consultants help companies of all sizes offer 401(k) plans that fit their business and provide stability for their employees. We take the heavy financial lifting off your plate while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or complete our online form to get started with establishing a 401(k) for your small business in St. Clair County, IL.
Benefits of Setting Up a 401(k) for Your Small St. Clair County, IL Business
Establishing and maintaining a 401(k) for a small business in St. Clair County, IL can do wonders for you, your employees, and your business's bottom line:
- recruit and retain great employees — Offering a 401(k) plan can be an important asset for recruiting and keeping top talent, particularly if many St. Clair County, IL companies are hiring for the same position. Some employees will even quit their job over a 401(k), and offering one can help your business stand out, especially if they are offered to people beyond the highest earners.
- Tax benefits — Both employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not exceed the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several tax credits when businesses first establish a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their taxable income and their contributions grow tax free.
- Increased financial security for employees — A 401(k) plan allows employees to feel more confident about how they'll spend their golden years. Greater financial security ultimately 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 advisor to establish and manage your small business's 401(k), most of that fiduciary duty will go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the critical tasks of employee education, compliance, and administrative responsibilities for you, so you can enjoy 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 simply perform a 401(k) rollover 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 your industry, your "small business" may have up to 1,500 employees, or it may just be yourself. 401(k) plans are available to all businesses, regardless of how many employees they have:
In any 401(k) plan, employees can put funds into the account through money taken out of their paychecks. Most 401(k)s have many different investment opportunities. Employers can make matching contributions as an added benefit to employees. Most 401(k) plans must abide by stringent nondiscrimination requirements, and are subject to yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case the limit is $30,000.
St. Clair County, IL businesses with multiple employees have a few different considerations to make when setting up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The key 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 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 increasingly popular as they reduce tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as a business owner you would be required 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 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 default contribution rate starts at 3% and increases by 1% each year until it maxes out at 6%, unless the employee chooses 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 save more as they can make contributions both as a worker and a businesses owner. 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.
The "best" plan for your will depend on your business and your and your employees' needs. If you're thinking of opening a 401(k) plan for your small St. Clair County, IL business, schedule a meeting with a member of our advisor team today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Small St. Clair County, IL Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some St. Clair County, IL employers may still be wary, 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 detailed Google searches can't come close to offering the same level of skill and experience as a licensed advisory firm. Financial advisors can partner with small business owners to develop a 401(k) plan meant specifically to benefit their business. They can help choose the plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and managing a plan — There are numerous requirements you must follow when initiating 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and manage the operation and yearly 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 listing in a list of benefits, but many in the job market don't know the full benefits a plan provides. We can connect the words "401(k)" to concrete 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 concepts such as diversification, risk tolerance, and rebalancing to optimally 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 the status of their retirement savings.
- Compliance — 401(k) plans have different rules and contribution limits. Not following them can lead to harsh fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are morally and legally mandated to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor offers significant value to St. Clair County, IL small business owners who want to experience the benefits of a 401(k) plan. By working with a financial advisor, small business owners can save on taxes and make their business more attractive to current and potential 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 what you do best and what you're passionate about – 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.