401 (k) for small business in St. Peters, MO. Setting up a 401(k) plan for your small business in St. Peters, MO provides various benefits to both you and the people that work for you, helping businesses stand out and provide a more secure to their employees. Beyond just attracting great employees, offering a 401(k) plan can also help both businesses and employees lower their tax liability. But, some business owners might not be confident they want to move forward because of the time commitment, as well as the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our St. Peters, MO 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 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. Call Correct Capital today at 314-930-401(k) or contact us online to get started with establishing a 401(k) for your small business in St. Peters, MO.
Do I Need a 401(k) For My St. Peters, MO Small Business?
Setting up and operating a 401(k) for a small business in St. Peters, MO has numerous benefits, for employers, your employees, and your business's bottom line:
- recruit and keep great employees — Providing retirement plans can be an essential tool for attracting and retaining top talent, particularly in a competitive St. Peters, 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 deductions — Both employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make are tax deductible up to 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 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 retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security ultimately leads to more productivity.
- Reduced liability — Employers owe a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a a deep level of investment comprehension and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), the bulk of that liability 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 lion's share of employee education, compliance, and administrative duties on your behalf, so you can enjoy 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 company, they can effortlessly rollover their 401(k) to an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in St. Peters, 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 size:
401(k) Plans
In any 401(k) plan, employees can put savings into the account through money taken out of their paychecks. Most 401(k)s have many different 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 perk to employees. Most 401(k) plans must abide by strict nondiscrimination requirements, and are subject to 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 turn 50 or older this year, in which case you can contribute an additional $7,500 as a catch-up contribution.
St. Peters, 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 — Contributions made with a traditional deferral are taxed differently 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. When the money is withdrawn it is taxed as ordinary income at the plan participant'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 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 employees to diversify their tax exposure 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, 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 percentage of their pay contributed to the plan unless they choose to opt out or contribute a different amount. The automatic 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 company would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are intended for owner-only businesses, 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 allows participants to make higher contributions as they can make contributions both as an employee and an employer. Unlike other 401(k) plans, individual 401(k)s do not require annual filings with the IRS unless the account balance is more than $250,000.
What plan works best for your and your employees depends on your business and employees. If you're considering opening a 401(k) plan for your small St. Peters, MO business, schedule a meeting with a member of our advisor team today to get started.
How a Financial Advisor Can Help Your St. Peters, MO Small Business With Your 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some St. Peters, MO employers may still be cautious, 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 our advisory firm can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few detailed Google searches are a poor replacement for years of experience and everyday interaction with retirement plans. Financial advisors can partner with small business owners to develop a 401(k) plan that meets the specific needs of their business and employees. 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 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 participant
A financial advisory firm can do all of that for you, and manage the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The term "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 bridge the term "401(k)" to specific steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are qualified to perform portfolio management will be able to provide investment 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 feel good about with the status of their retirement savings.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to harsh fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently fail to comply with a requirement.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary duty to act in the best interest of their employees. We are morally 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 considerable value to St. Peters, MO small business owners who are looking to set up 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. Peters, MO
If you own a small business in St. Peters, MO, you want to spend your time on why you started your business – 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. Peters, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
