401 (k) for small business in Town and Country, MO. Initiating a 401(k) plan for your small business in Town and Country, MO provides numerous benefits to both employers and employees, helping businesses stand out and provide long-term financial security to their employees. Beyond just attracting great employees, offering a 401(k) plan can also help both businesses and employees lower their tax liability. However, some business owners might not be confident they want to proceed because of the time commitment, as well as the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Town and Country, MO financial advisors and retirement consultants work with companies large and small to offer customized and successful 401(k) plans. We take the heavy financial lifting off your plate while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or fill out our online form to get started with establishing a 401(k) for your small business in Town and Country, MO.
Do I Need a 401(k) For My Town and Country, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Town and Country, MO has numerous benefits, for employers, your workers, and your business goals alike:
- recruit and retain top talent — Offering a 401(k) plan can be a valuable asset for recruiting and retaining top talent, especially if many Town and Country, MO companies are advertising for the same job. One survey says 401(k) plans are the most important financial benefit to employees, and offering one can help differentiate your business from competitors, especially if they are offered to people beyond the highest ranking employees.
- Tax benefits — Both businesses and employees can reduce their tax liability 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 can benefit from tax-deferred contributions and potentially reduce their taxable income.
- Increased employee retirement savings — 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 take on a fiduciary responsibility to their employees when they provide retirement plans, which involves a wide range of investment knowledge and responsibilities. If you work with an ERISA 3(38) Fiduciary provider to establish and manage your small business's 401(k), the bulk of that liability will go to them.
- Simple administration — When you parter with a 3(16) administrator to establish your small business 401(k) plan, they'll handle the critical tasks of employee education, compliance, and administrative duties for you, so you can enjoy 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 takes a new job elsewhere, they can effortlessly perform a 401(k) rollover to an IRA or new 401(k) without you having to do much work.
Types of 401(k) Plans That Can Help Your Small Business in Town and Country, MO
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. 401(k) plans are available to all businesses, regardless of size:
In any 401(k) plan, employees can put savings into the account through payroll deductions. Most 401(k)s offer a wide range of investment options. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must meet rigid nondiscrimination requirements, and perform yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case the limit is $30,000.
Town and Country, MO businesses 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 it is pre-tax money, 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, 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 more popular as they allow employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer 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, 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 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 reaches a maximum of 6%, unless the employee elects a different contribution rate.
In exchange for obligatory employer contributions, Safe Harbor plans are not subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are are meant for people who are self-employed, or businesses where the only employees are spouses. Contributions are tax deductible and gains grow tax-deferred until the money is taken out. 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 is more than $250,000.
The "best" plan for your will depend on your business and your and your employees' needs. If you're thinking of establishing a 401(k) plan for your small Town and Country, MO business, schedule an appointment with one of our advisers today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Your Town and Country, MO Small Business With Your 401(k) Plans
Even considering the benefits of a small business offering a 401(k) plan, some Town and Country, MO employers may still be cautious, as they may not have the knowledge, time, or interest to establish and operate a plan. That’s where a financial advisor can help. 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 quick internet searches can't come close to offering the same level of skill and experience as a licensed advisory firm. Financial advisors can partner with small business owners to develop a 401(k) plan meant specifically 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 operating a plan — There are numerous requirements you must adhere to when initiating your small business 401(k). You have to:
- Adopt a written plan document
- Arrange a trust fund for plan assets
- Establish a record keeping system
- Provide plan information to eligible employees
A financial advisory firm can assist with all of the above requirements, and manage the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The word "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 bridge the words "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 market insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' funds 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 talk directly to your small business's employees so feel at ease 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 your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- 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 morally and legally mandated to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor can provide considerable value to Town and Country, MO small business owners who are looking to create 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 prospective employees.
Call Correct Capital to Set Up a 401(k) For Your Small Business in Town and Country, MO
If you own a small business in Town and Country, MO, you want to spend your time on why you started your business – 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 Town and Country, MO business today, call Correct Capital at 314-930-401(k) or contact us online.