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 people in the job market. In addition to offering more benefits than competitors, providing a 401(k) plan also provides numerous tax benefits for both employers and employees. But, some business owners may still be wary because of the time commitment, as well as the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Tower Grove, MO financial advisors and retirement consultants help companies of all sizes offer customized and effective 401(k) plans. We do most of the work for you, so you can focus on growing your business while we focus on growing your and your employees' retirement accounts. Call Correct Capital today at 877-930-4015 or fill out our online form to get started with setting up a 401(k) for your small business in Tower Grove, MO.
Benefits of Setting Up a 401(k) for Your Small Tower Grove, MO Business
Establishing and operating a 401(k) for a small business in Tower Grove, MO can do wonders for you, your workers, and your business goals alike:
- recruit and keep great talent — Providing retirement plans is a valuable tool for attracting and retaining high-performing employees, 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 differentiate your business from competitors, especially if they are offered to people beyond the highest earners.
- Tax benefits — Both employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers are tax deductible up to the annual corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several 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 ultimately leads to more productivity.
- Reduced liability — Employers owe a fiduciary duty to their employees when they provide 401(k) plans, which involves a wide range of investment knowledge and responsibilities. If you work with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), the bulk of that fiduciary duty will be passed onto them.
- Ease of administration — When you parter with a 3(16) administrator to establish your small business 401(k) plan, they'll take care of the critical tasks of employee education, compliance, and administrative responsibilities on your behalf, so you can enjoy the rewards of offering a plan without much nuisance. Furthermore, 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 a new retirement account without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Tower Grove, MO?
Depending on your industry, your "small business" may have up to 1,500 employees, or it may just be yourself. 401(k) plans are available to all businesses, regardless of how many employees they have:
401(k) Plans
In any 401(k) plan, employees can put funds into the account through money taken out of their paychecks. Most 401(k)s offer a diversity of investments that may include mutual funds, index funds, bonds, and company stock. Employers can make matching contributions as an added 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 that is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Tower Grove, MO 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 the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning the contributions are made before taxes are taken out, lowering an employee's 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 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 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 obligated to make fully vested contributions to your employees' accounts. 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, whether or not the employee chooses 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 have a percentage of their pay contributed to the plan 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 reaches a maximum of 6%, unless the employee chooses a different contribution rate.
In exchange for required employer contributions, Safe Harbor plans are not 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 a worker and an employer. Unlike other 401(k) plans, individual 401(k)s do not require annual filings with the IRS unless the account balance exceeds $250,000.
What plan works best for your and your employees depends on your business and your and your employees' needs. If you're considering opening a 401(k) plan for your small Tower Grove, MO business, schedule an appointment with a member of our advisor team today to get started.
How a Financial Advisor Can Help Your Tower Grove, MO Small Business With Your 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Tower Grove, MO employers might still be uneasy, as they may not have the know-how, time, or interest to establish and operate a plan. That’s where we come in. Here are some ways that a financial advisor can assist with your small business’s 401(k) plan:
- Plan design — A few detailed Google searches are a poor replacement for years of experience and working on retirement plans every day. Financial advisors can work with small business owners to create a 401(k) plan meant expressly to benefit them. 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 numerous requirements you must follow 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and handle the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The phrase "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) entails. We can bridge the term "401(k)" to specific steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are experienced with portfolio management will be able to offer investment insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to optimally position employees' savings for further growth.
- Employee education — Employees need to understand their plan in order to get the greatest reward from it. 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 — Employers must adhere to certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to harsh fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are ethically and legally required to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor can provide significant 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 focus on why you started your business – not being bogged down 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 877-930-4015 or contact us online.
