401 (k) for small business in Sunset Hills, MO. Establishing a 401(k) plan for your small business in Sunset Hills, MO can offer numerous benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. Beyond just attracting great employees, offering a 401(k) plan also provides numerous tax benefits for both employers and employees. However, some business owners may still be cautious because of the time involved in setting up and operating a plan, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Sunset Hills, MO financial planners and retirement consultants work with companies large and small to offer customized and successful 401(k) plans. We take the heavy financial lifting off your plate, so you can spend your energy on growing your business while we focus on growing your and your employees' retirement accounts. Speak to a Correct Capital team member today at 314-930-401(k) or fill out our online form to learn more about establishing a 401(k) for your small business in Sunset Hills, MO.
Do I Need a 401(k) For My Sunset Hills, MO Small Business?
Setting up and operating a 401(k) for a small business in Sunset Hills, MO can do wonders for employers, your employees, and your business's bottom line:
- Attract and retain great employees — Offering retirement plans can be an important asset for attracting and retaining skilled employees, especially in a competitive Sunset Hills, MO job market. Employees see a 401(k) as a valuable benefit, and offering one can help differentiate your business from competitors, especially if they are offered to people beyond management.
- Tax benefits — Both employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers 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 for first-time 401(k) plans and offering automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased financial security for employees — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers owe a fiduciary duty to their employees when they provide retirement plans, which involves a a deep level of investment comprehension and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to set up and operate your small business's 401(k), the bulk of that fiduciary duty will go to them.
- Simple administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll manage the critical tasks of employee education, compliance, and administrative tasks for you, so you can enjoy the rewards of offering a plan without putting in too much work yourself. Moreover, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new company, they can easily perform a 401(k) rollover to an IRA or new 401(k) without you having to do much work.
Types of 401(k) Plans For Your Small Business in Sunset Hills, 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:
In any 401(k) plan, employees can put savings 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 abide by rigid nondiscrimination requirements, and undergo annual tests to ensure they remain compliant. 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 contribute an additional $7,500 as a catch-up contribution.
Sunset Hills, MO employers 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 it is pre-tax money, and the employee can then deduct the amount contributed from their taxable income. Taxes are paid when the money is withdrawn.
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, 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. 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, regardless of whether 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 default contribution rate starts at 3% and increases by 1% annually 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
Solo and Individual 401(k) plans are intended for owner-only businesses, or a business where the only employee is a spouse. Contributions are tax deductible and the money is taxed when it's withdrawn. This allows participants to save more as they can make contributions both as an employee and an employer. 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 setting up a 401(k) plan for your small Sunset Hills, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Small Sunset Hills, MO Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Sunset Hills, MO employers might still be cautious, as managing a 401(k) plan is complex and time-consuming. That’s where a financial advisor can help. Here are some ways that our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A handful of quick internet searches are a poor replacement for years of experience and working on retirement plans every day. 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 plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Establishing and managing a plan — There are specific steps you must take when initiating 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 assist with all of the above requirements, and manage the operation and yearly reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The word "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 bridge the phrase "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 well versed in portfolio management will be able to offer investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' savings for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will benefit them. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' employees so they're confident with the status of their retirement savings.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following them can lead to stiff fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary duty to act in the best interest of plan participants. We are morally and legally bound to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor offers significant value to Sunset Hills, MO small business owners who want to experience the benefits of 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 potential employees.
Call Correct Capital to Establish a 401(k) For Your Small Business in Sunset Hills, MO
If you own a small business in Sunset Hills, MO, you want to focus on what you do best and what you're passionate about – not being distracted by retirement plan responsibilities 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 Sunset Hills, MO business today, call Correct Capital at 314-930-401(k) or contact us online.