401 (k) for small business in St. Louis County, MO. Initiating a 401(k) plan for your small business in St. Louis County, MO provides various benefits to both employers and employees, helping businesses offer more security and benefits to prospective employees. Beyond just offering more benefits than competitors, providing a 401(k) plan also affords numerous tax benefits for both employers and employees. But, some business owners might not be sure if they want to move forward because of the time involved in setting up and maintaining a plan, in addition to the complex web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our St. Louis County, MO financial advisors and retirement consultants work with companies large and small to offer 401(k) plans that fit their business and provide stability for their employees. We do the financial and administrative work for you while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or contact us online to get started with creating a 401(k) for your small business in St. Louis County, MO.
Should I Establish a 401(k) For My St. Louis County, MO Small Business?
Setting up and maintaining a 401(k) for a small business in St. Louis County, MO can do wonders for you, your workers, and your business goals alike:
- recruit and retain great employees — Providing a 401(k) plan can be an important tool for attracting and keeping skilled employees, particularly if many St. Louis County, MO companies are hiring 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 you offer 401(k)s to rank-and-file employees as well.
- Tax deductions — Both employers and employees can reduce how much they owe in taxes 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, as laid out in section 404 of the Internal Revenue Code. There are also several tax credits for first-time 401(k) plans and offering automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased employee retirement savings — A 401(k) plan allows employees to feel better about how they'll spend their golden years. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers assume a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a wide range of investment comprehension and obligations. If you work with an ERISA 3(38) Fiduciary advisor to establish and operate your small business's 401(k), the bulk of that liability will go to them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the lion's share of employee education, compliance, and administrative duties for you, so you can reap the rewards of offering a plan without much hassle. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, they can easily perform a 401(k) rollover to a new retirement account without you having to do much work.
Types of 401(k) Plans That Can Help Your Small Business in St. Louis County, MO
Depending on what industry you're in, 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:
401(k) Plans
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s offer a wide range of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and are subject to annual tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS mandates 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. Louis County, MO companies with multiple employees have a few different things to think about when setting 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 contributions are made before taxes are taken out, and the employee can then deduct the amount deposited from their 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, 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 decide to set up a Safe Harbor 401(k), as an employer 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, regardless of whether the employee chooses to contribute to the plan.
- 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 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 chooses a different contribution rate.
In exchange for obligatory employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are are meant for owner-only businesses, or businesses where the only employees are spouses. Contributions are tax deductible and savings 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 is more than $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're considering opening a 401(k) plan for your small St. Louis County, MO business, schedule an appointment with a member of our advisor team today to get started.
How a Financial Advisor Can Help Your St. Louis County, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some St. Louis County, MO employers might still be cautious, as they may not have the know-how, time, or interest to establish and operate a plan. That’s where we come in. 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 years of experience and everyday interaction with retirement plans. Financial advisors can work with small business owners to develop a 401(k) plan meant specifically to benefit them. 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 beginning 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 do all of that for you, and manage the operation and annual reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might show up 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 term "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 experienced with portfolio management will be able to provide market insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best 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 feel good about 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 harsh fines. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary duty — When offering a retirement plan, small business owners have a fiduciary duty 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 savings.
A financial advisor can provide considerable value to St. Louis County, MO small business owners who want to experience the benefits of 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 Start a 401(k) For Your Small Business in St. Louis County, MO
If you own a small business in St. Louis County, MO, you want to focus 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. Louis County, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
