401(k) for small business in St. Louis County, MO. Creating a 401(k) plan for your small business in St. Louis County, MO can offer numerous benefits to both employers and employees, helping businesses stand out and provide long-term financial security to their employees. In addition to offering more benefits than competitors, providing a 401(k) plan also offers 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 establishing and operating a plan, as well as the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our St. Louis County, MO financial advisors 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, so you can focus on growing your business while we focus on growing your and your employees' savings. 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?
Establishing and operating a 401(k) for a small business in St. Louis County, MO can do wonders for employers, your workers, and your business goals alike:
- recruit and keep top talent — Providing a 401(k) plan can be a valuable asset for attracting and retaining top talent, especially if many St. Louis County, MO 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 you offer 401(k)s to rank-and-file employees as well.
- Tax deductions — Both employers and employees can reduce their tax liability 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, which is 25% of covered payroll. The federal government also offers tax credits for first-time 401(k) plans and offering automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — A 401(k) plan allows employees to feel more confident about how they'll spend their golden years. Greater financial security eventually leads to more productivity.
- Decreased liability — Employers assume a fiduciary duty to their employees when they provide retirement plans, which involves a wide range of investment savvy and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), most of that liability will be placed on them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll handle the critical tasks of employee education, compliance, and administrative duties on your behalf, so you can reap the rewards of offering a plan without putting in too much work yourself. Furthermore, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new job elsewhere, they can easily perform a 401(k) rollover to a new retirement account without you having to do much work.
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. 401(k) plans are available to all businesses, regardless of size:
In any 401(k) plan, employees can put funds into the account through payroll deductions. Most 401(k)s have a wide range of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an added benefit to employees. Most 401(k) plans must abide by rigid nondiscrimination requirements, and undergo annual tests to ensure the plan doesn't discriminate in favor of highly compensated employees. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case you can deposit an additional $7,500 as a catch-up contribution.
St. Louis County, MO employers with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — Contributions made with a traditional deferral are taxed differently than with a Roth deferral. 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, so 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 an employer 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 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 money is taken out of their paycheck unless they decide not to. The automatic contribution rate starts at 3% and increases by 1% each year until it maxes out at 6%, unless the employee decides on a different contribution rate.
In exchange for mandatory employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are are meant for people who are self-employed, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and the money is taxed when it's 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 do not require 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 interested in establishing a 401(k) plan for your small St. Louis County, MO business, schedule an appointment with a member of our team today to get started.
How a Financial Advisor Can Help Small St. Louis County, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, 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 a financial advisor can help. Here are some some of the many ways that a financial advisor can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A handful of detailed Google searches can't come close to offering the same level of skill and experience as a professional retirement consultant. Financial advisors can work with small business owners to create a 401(k) plan meant expressly to benefit their company. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and managing a plan — There are numerous requirements you must adhere to when initiating 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 oversee the operation and annual reviews of the plan.
- Advertising your 401(k) plan to potential employees — The term "401(k)" might show up on a job ad in a list of benefits, but many in the job market don't fully understand what a 401(k) entails. We can bridge the term "401(k)" to specific 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 principles 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 can talk directly to your small business's employees so feel at ease with how their money is being held and invested.
- 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 break with the regulations.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are morally and legally required to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor offers considerable value to St. Louis County, MO small business owners who are looking to establish 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 Set Up 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 why you started your business – 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.