401(k) for small business in St. Louis, MO. Establishing a 401(k) plan for your small business in St. Louis, MO provides 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, offering a 401(k) plan also affords numerous tax benefits for both employers and employees. But, 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. Louis, MO financial advisors and retirement consultants work with companies large and small to offer customized and successful 401(k) plans. We do the financial and administrative work for you, 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, MO.
Should I Establish a 401(k) For My St. Louis, MO Small Business?
Establishing and maintaining a 401(k) for a small business in St. Louis, MO has numerous benefits, for you, your workers, and your business goals alike:
- Attract and retain top employees — Offering retirement plans is a valuable asset for recruiting and retaining high-performing workers, especially in a competitive St. Louis, MO job market. Employees see a 401(k) as a valuable benefit, and offering one can help your business stand out, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax benefits — Both employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible up to the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several tax credits when companies first establish 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 employee retirement savings — A 401(k) plan allows employees to feel more confident 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 retirement plans, which involves a wide range of investment understanding and obligations. If you work with an ERISA 3(38) Fiduciary provider to initiate and operate your small business's 401(k), most of that fiduciary duty will be passed onto them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll handle the lion's share of employee education, compliance, and administrative responsibilities on your behalf, so you can enjoy the rewards of offering a plan without much hassle. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can simply rollover their 401(k) to a new retirement account without much hassle to you.
Types of 401(k) Plans That Can Help Your Small Business in St. Louis, MO
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. 401(k) plans are available to all businesses, regardless of how many employees they have:
In any 401(k) plan, employees can put savings 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 employers can deposit an equal amount as their employees as an additional benefit to employees. Most 401(k) plans must meet strict nondiscrimination requirements, and undergo yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 that 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, 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 at different times than with a Roth deferral. 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 money the employee's already paid taxes on, 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 withdrawal is made. Roth 401(k)s are becoming more popular as they reduce tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be obligated to make fully vested contributions to your employees' plans. 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 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 money is taken out of their paycheck unless they choose to opt out or contribute a different amount. The automatic contribution rate starts at 3% and increases by 1% annually until it maxes out at 6%, unless the employee decides on 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 intended for people who are self-employed, or a business where the only employee is a spouse. 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 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 considering establishing a 401(k) plan for your small St. Louis, MO business, schedule a meeting with a member of our advisor team today to find out more about the benefits and options available to you.
How a Financial Advisor Can Help Small St. Louis, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some St. Louis, MO employers may still be cautious, 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 our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A few quick internet searches are a poor replacement for decades of experience and working on retirement plans every day. Financial advisors can work with small business owners to design 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.
- Initiating and managing a plan — There are specific steps you must take when establishing 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 handle the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to potential employees — The word "401(k)" might appear 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 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 investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to best position employees' savings 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 speak directly to your small business's employees so feel at ease with how their money is being held and invested.
- Compliance — Employers must abide by various rules and contribution limits when offering a 401(k) plan. Not following them can lead to harsh fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- 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 required to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor can provide significant value to St. Louis, MO small business owners who are looking to establish 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 prospective employees.
Call Correct Capital to Start a 401(k) For Your Small Business in St. Louis, MO
If you own a small business in St. Louis, MO, 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 not have the time, knowledge, or interest to manage. 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, MO business today, call Correct Capital at 314-930-401(k) or contact us online.