401(k) for small business in Tower Grove, MO. Creating a 401(k) plan for your small business in Tower Grove, MO provides various benefits to both you and the people that work for you, helping businesses offer more security and benefits to prospective employees. In addition to offering more benefits than competitors, offering a 401(k) plan also offers numerous tax benefits for both employers and employees. However, some business owners may still be wary because of the time involved in establishing and operating an account, in addition to the intricate web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Tower Grove, MO financial planners and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We do most of the work for you while you focus on making your business flourish. Call Correct Capital today at 314-930-401(k) or contact us online to get started with setting up a 401(k) for your small business in Tower Grove, MO.
Why You Should Up a 401(k) for Your Small Tower Grove, MO Business
Establishing and maintaining a 401(k) for a small business in Tower Grove, MO has numerous benefits, for employers, your workers, and your business goals alike:
- recruit and retain great talent — Offering a 401(k) plan can be an important asset for recruiting and keeping skilled workers, particularly if many Tower Grove, MO companies are advertising for the same position. Some employees will even quit their job over a 401(k), 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 to the extent that the contributions do not surpass the annual corporate tax deduction limit on employer contributions, as stipulated in section 404 of the Internal Revenue Code. The federal government also offers tax credits when employers first set up a 401(k) plan, and if the employer offers automatic enrollment. Employees enjoy tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — A 401(k) plan allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers assume a fiduciary responsibility to their employees when they offer retirement plans, which involves a a deep level of investment understanding and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), the bulk of that fiduciary duty will go to them.
- Ease of 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 on your behalf, so you can enjoy the rewards of offering a plan without much nuisance. Additionally, 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 Tower Grove, MO?
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. 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 offer a diversity 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 perk to employees. Most 401(k) plans must adhere to strict nondiscrimination requirements, and perform yearly tests to ensure the plan doesn't favor highly compensated employees. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Tower Grove, MO businesses with multiple employees have a few different considerations to make 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 it is pre-tax money, and the employee can then deduct the amount contributed from their taxable income. When the money is withdrawn it is taxed as ordinary income at the employee's tax rate at the time of withdrawal.
With Roth deferrals, contributions are made with after-tax dollars, meaning the money grows tax-free and there are no taxes when the money's withdrawn, 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 reduce tax liability 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, whether or not 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 part of their pay contributed to the plan unless they decide not to. The default contribution rate starts at 3% and increases by 1% each 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 owner-only businesses, or a business where the only employee is a spouse. Contributions are tax deductible and earnings grow tax-deferred until withdrawn. This allows participants to save more as they can make contributions both as an employee and a businesses owner. Unlike other 401(k) plans, individual 401(k)s are not subject to annual filings with the IRS unless the account balance surpasses $250,000.
What plan works best for your and your employees depends on your business and your and your employees' needs. If you're interested in setting up a 401(k) plan for your small Tower Grove, MO business, schedule a meeting with a member of our advisor team today to discover more about the benefits and options available to you.
How a Financial Advisor Can Help Small Tower Grove, MO Businesses With Their 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Tower Grove, 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 a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A handful of detailed Google searches are a poor replacement for decades of experience and everyday interaction with retirement plans. Financial advisors can partner 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 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 annual reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The word "401(k)" might appear on a job ad 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 concrete steps to people living the golden years they always wanted.
- 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' money for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will benefit them. At Correct Capital, we can speak directly to your small business's employees so feel good about with the status of their retirement savings.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to harsh penalties. A financial advisor can help to ensure all of the proper rules are followed.
- Fiduciary duty — When offering a retirement plan, small business owners have a fiduciary duty to act in the best interest of plan participants. We are ethically and legally required to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor can provide significant value to Tower Grove, MO 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 Start a 401(k) For Your Small Business in Tower Grove, MO
If you own a small business in Tower Grove, MO, you want to focus on what you do best and what you're passionate about – not being bogged down by retirement plan responsibilities 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 Tower Grove, MO business today, call Correct Capital at 314-930-401(k) or contact us online.