401 (k) for small business in Swansea, IL. Initiating a 401(k) plan for your small business in Swansea, IL provides various benefits to both employers and employees, helping businesses stand out and provide long-term financial security to their employees. In addition to attracting top talent, providing a 401(k) plan can also help both businesses and employees lower their tax liability. However, some business owners may still be wary because of the time involved in setting up and operating a plan, as well as the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Swansea, IL financial planners and retirement consultants help companies of all sizes offer 401(k) plans that fit what their business needs and what their employees want. 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' retirement accounts. Call Correct Capital 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 Swansea, IL.
Do I Need a 401(k) For My Swansea, IL Small Business?
Establishing and operating a 401(k) for a small business in Swansea, IL can do wonders for employers, your workers, and your business goals alike:
- Attract and retain top talent — Offering a 401(k) plan can be an essential tool for attracting and keeping top talent, particularly in a competitive Swansea, IL job market. One survey says 401(k) plans are the most important financial benefit to employees, 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 businesses and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers are tax deductible up to the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several tax credits when companies 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 employee retirement savings — A retirement account allows employees to feel better about how they'll live in retirement. Greater financial security ultimately leads to more productivity.
- Reduced liability — Employers assume a fiduciary duty to their employees when they provide retirement plans, which involves a a deep level of investment knowledge and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to initiate and manage your small business's 401(k), most of that fiduciary duty will be passed onto them.
- Simple administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll handle the critical tasks of employee education, compliance, and administrative tasks for you, so you can reap the rewards of offering a plan without much nuisance. Moreover, advisors can help with 401(k) payroll integration 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 much hassle to you.
Types of 401(k) Plans For Your Small Business in Swansea, IL
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:
In any 401(k) plan, employees can put savings into the account through money taken out of their paychecks. Most 401(k)s offer a wide range of investment options. Employers can employers can deposit an equal amount as their employees as an additional perk to employees. Most 401(k) plans must adhere to strict nondiscrimination requirements, and are subject to 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.
Swansea, IL companies 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 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 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 withdrawal is made. Roth 401(k)s are becoming more 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 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 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 choose to opt out or contribute a different amount. The default 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 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 earnings grow tax-deferred until withdrawn. This allows participants to save more as they can make contributions both as a worker and a businesses owner. Unlike other 401(k) plans, individual 401(k)s do not require annual filings with the IRS unless the account balance surpasses $250,000.
The "best" plan for your will depend on your business and employees. If you're thinking of opening a 401(k) plan for your small Swansea, IL business, schedule an appointment with a member of our team today to discover more about the benefits and options available to you.
How a Financial Advisor Can Help Small Swansea, IL Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Swansea, IL employers might still be uneasy, 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 detailed Google searches can't come close to offering the same degree of skill and experience as a professional retirement consultant. 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 right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and operating a plan — There are numerous requirements you must adhere to when establishing 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 assist with all of the above requirements, and handle the operation and yearly reviews of the plan.
- Marketing your 401(k) plan to potential employees — The phrase "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 connect 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 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 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 offer both group classes and one-on-one counseling sessions with our small business clients' employees so they're confident with how their money is being held and invested.
- Compliance — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to harsh fees. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary duty to act with diligence, prudence, and care. We are ethically and legally obligated 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 Swansea, IL 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 Establish a 401(k) For Your Small Business in Swansea, IL
If you own a small business in Swansea, IL, you want to spend your time on what you do best and what you're passionate about – 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 Swansea, IL business today, call Correct Capital at 314-930-401(k) or contact us online.