401(k) for small business in St. Louis County, MO. Creating a 401(k) plan for your small business in St. Louis County, MO provides various benefits to both employers and employees, helping businesses stand out and provide long-term financial security to their employees. Beyond just offering more benefits than competitors, providing a 401(k) plan also offers numerous tax benefits for both employers and employees. However, some business owners may still be cautious because of the time commitment, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our St. Louis County, MO financial planners and retirement consultants work with companies large and small to 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 get started with setting up a 401(k) for your small business in St. Louis County, MO.
Benefits of Setting Up a 401(k) for Your Small St. Louis County, MO Business
Establishing and operating a 401(k) for a small business in St. Louis County, MO has numerous benefits, for you, your workers, and your business goals alike:
- recruit and keep top talent — Providing a 401(k) plan can be an essential asset for recruiting and retaining top talent, especially in a competitive St. Louis County, MO job market. 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 deductions — Both employers 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 set up a 401(k) plan, and if the employer offers automatic enrollment. Employees can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — A retirement account allows employees to feel more confident about how they'll live in retirement. Greater financial security eventually leads to more productivity.
- Decreased liability — Employers assume a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a a deep level of investment understanding and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to set up and manage 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 critical tasks of employee education, compliance, and administrative responsibilities for you, so you can reap 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 rollover their 401(k) to a new retirement account without you having to do much work.
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What 401(k) Plans Are Available to Small Businesses in St. Louis County, MO?
Depending on your industry, 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:
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 investment opportunities. Employers can employers can deposit an equal amount as their employees as an additional benefit to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and undergo yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you turn 50 or older this year, in which case the limit is $30,000.
St. Louis County, MO businesses 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. 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 after-tax dollars, 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 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 fully vested contributions to your employees' accounts. 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 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 percentage of their pay contributed to the plan 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 business would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
Solo and Individual 401(k) plans are intended for owner-only businesses, or businesses where the only employees are spouses. Contributions are tax deductible and gains grow tax-deferred until withdrawn. 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, make an appointment 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 Your St. Louis County, MO Small Business With Your 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some St. Louis County, MO employers might still be uneasy, as managing a 401(k) plan is complex and time-consuming. 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 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 right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing a plan — There are numerous requirements you must follow when establishing your small business 401(k). You have to:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Establish a record keeping system
- Provide plan information to participant
A financial advisory firm can do all of that for you, and handle the operation and annual reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The term "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 bridge the term "401(k)" to definite images of a more secure retirement, with very clear stepping stones on how to get there.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to offer 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 can talk directly to your small business's employees so they're confident with how their money is being held and invested.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to harsh fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently fail to comply with a requirement.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary duty to act in the best interest of plan participants. 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. Louis County, MO small business owners who are looking to set up a 401(k) plan. By consulting 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 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 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. Louis County, MO business today, call Correct Capital at 877-930-4015 or contact us online.
