401 (k) for small business in Tower Grove, MO. Creating a 401(k) plan for your small business in Tower Grove, MO can offer various benefits to both you and the people that work for you, helping businesses stand out and provide a more secure to their employees. In addition to attracting great employees, offering 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 commitment, as well as the complex web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Tower Grove, MO financial planners and retirement consultants work with companies large and small to offer 401(k) plans that fit their business and provide stability for their employees. We do most of the work for you while you focus on your business. Speak to a Correct Capital team member today at 314-930-401(k) or fill out our online form to learn more about 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
Setting up and maintaining a 401(k) for a small business in Tower Grove, MO can do wonders for you, your employees, and your business goals alike:
- recruit and keep great employees — Providing a 401(k) plan is an essential tool for recruiting and retaining high-performing employees, particularly if many Tower Grove, MO companies are advertising for the same position. 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 the highest earners.
- Tax benefits — Both businesses 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 for first-time 401(k) plans and offering 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 feel better about how they'll live in retirement. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers take on a fiduciary duty to their employees when they offer 401(k) plans, which involves a wide range of investment knowledge and responsibilities. If you partner with an ERISA 3(38) Fiduciary provider to set up and manage your small business's 401(k), the majority of that liability will be placed on 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 tasks for you, so you can benefit from the rewards of offering a plan without putting in too much work yourself. Moreover, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can effortlessly 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 Tower Grove, MO
Depending on what industry you're in, 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 offer many different investment opportunities. Employers can employers can deposit an equal amount as their employees as an added perk to employees. Most 401(k) plans must follow rigid 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 are 50 or older, in which case you can contribute an additional $7,500 as a catch-up contribution.
Tower Grove, MO employers with multiple employees have a few different options in how they set 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 money is deposited before taxes are taken out, 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 plan participant'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 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 a business owner you would be obligated to make contributions that are fully vested when made. To meet Safe Harbor requirements, you have four possible ways to 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 decide not to. The automatic contribution rate starts at 3% and increases by 1% each year until it maxes out at 6%, unless the employee elects 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
These 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 type of retirement account allows individuals to make contributions both as an employer and as an employee, providing higher contribution limits than many other individual-based retirement plans. Unlike other 401(k) plans, individual 401(k)s do not require 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 thinking of establishing a 401(k) plan for your small Tower Grove, MO business, schedule a meeting with one of our advisers today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Your Tower Grove, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Tower Grove, MO employers might still be cautious, as managing a 401(k) plan is complex and time-consuming. That’s where we come in. Here are some 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 degree of skill and experience as a licensed advisory firm. Financial advisors can work 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.
- Establishing and managing a plan — There are specific steps you must take when initiating 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 participant
A financial advisory firm can assist with all of the above requirements, and handle the operation and yearly reviews of your 401(k).
- Marketing your 401(k) plan to prospective employees — The word "401(k)" might show up 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 well versed in portfolio management will be able to provide 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 benefit them. At Correct Capital, we can talk 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 harsh fines. 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 their employees. We are ethically 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 offers remarkable value to Tower Grove, MO small business owners who are looking to establish a 401(k) plan. By partnering 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 Tower Grove, MO
If you own a small business in Tower Grove, MO, 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 Tower Grove, MO business today, call Correct Capital at 314-930-401(k) or contact us online.