401(k) for small business in Swansea, IL. Setting up a 401(k) plan for your small business in Swansea, IL can offer various benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. In addition to attracting top talent, offering a 401(k) plan can also help both businesses and employees reduce their tax liability. But, some business owners might not be sure if they want to proceed because of the time commitment, as well as the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Swansea, IL financial advisors and retirement consultants help companies of all sizes offer customized and successful 401(k) plans. We do most of the work for you, so you can spend your energy on growing your business while we focus on growing your and your employees' savings. Call Correct Capital today at 314-930-401(k) or fill out our online form to get started with setting up a 401(k) for your small business in Swansea, IL.
Why You Should Up a 401(k) for Your Small Swansea, IL Business
Setting up and operating a 401(k) for a small business in Swansea, IL has numerous benefits, for employers, your employees, and your business goals alike:
- recruit and keep top employees — Providing a 401(k) plan is a valuable tool for recruiting and keeping accomplished workers, especially if many Swansea, IL companies are hiring for the same job. 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 they are offered to people beyond the highest ranking employees.
- 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 annual corporate tax deduction limit on employer contributions, as defined in section 404 of the Internal Revenue Code. There are also several tax credits when employers first establish a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- 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 ultimately leads to more productivity.
- Decreased liability — Employers take on a fiduciary duty to their employees when they provide retirement plans, which involves a wide range of investment comprehension and obligations. If you work with an ERISA 3(38) Fiduciary provider to initiate and manage your small business's 401(k), the majority of that fiduciary duty will go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll manage the vast majority of employee education, compliance, and administrative responsibilities for you, so you can benefit from 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 simply 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 contribute 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 additional perk to employees. Most 401(k) plans must meet 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 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.
Swansea, IL companies with multiple employees have a few different options in how they set up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The main difference between traditional and Roth deferrals is when your employees pay taxes on their contributions. With a traditional deferral, contributions are tax-deferred, meaning the contributions are made before taxes are taken out, 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 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 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 automatic contribution rate starts at 3% and increases by 1% every year 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 are tax deductible and savings grow tax-deferred until 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 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 employees. If you're thinking of setting up a 401(k) plan for your small Swansea, IL business, make an appointment with a member of our team today to learn 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 may still be uneasy, as they may not have the knowledge, time, or interest to establish and operate a plan. That’s where we come in. 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 licensed advisory firm. Financial advisors can work with small business owners to design a 401(k) plan meant expressly to benefit their company. 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 initiating your small business 401(k). You must:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Establish 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 your 401(k).
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might show up on a job listing in a list of benefits, but many in the job market don't fully understand what a 401(k) can do for them. 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 concepts such as diversification, risk tolerance, and rebalancing to optimally position employees' money for further growth.
- Employee education — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we can speak directly to your small business's 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 them can lead to stiff fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally 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 ethically and legally mandated 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 Swansea, IL small business owners who are looking to create a 401(k) plan. By consulting 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 Swansea, IL
If you own a small business in Swansea, IL, you want to focus 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.