401 (k) for small business in University City, MO. Establishing a 401(k) plan for your small business in University City, MO can offer 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, providing a 401(k) plan can also help both businesses and employees lower their tax liability. But, some business owners may still be cautious because of the time involved in establishing and operating an account, in addition to the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our University City, MO financial planners and retirement consultants work with companies large and small to offer customized and successful 401(k) plans. We do most of the work for you while you focus on making your business flourish. Speak to a Correct Capital team member today at 314-930-401(k) or complete our online form to learn more about establishing a 401(k) for your small business in University City, MO.
Should I Establish a 401(k) For My University City, MO Small Business?
Setting up and operating a 401(k) for a small business in University City, MO can do wonders for you, your employees, and your business's bottom line:
- recruit and keep great talent — Offering retirement plans is an essential asset for attracting and keeping accomplished employees, particularly if many University City, MO companies are advertising for the same job. 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 management.
- Tax deductions — Both employers and employees can reduce their tax liability with a 401(k) plan. Matching contributions employers make are tax deductible up to the yearly corporate tax deduction limit on employer contributions, as laid out 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 taxable income and their contributions grow tax free.
- Increased financial security for employees — A retirement account allows employees to feel more confident about how they'll live in retirement. Greater financial security ultimately leads to more productivity.
- Decreased liability — Employers assume a fiduciary responsibility to their employees when they offer 401(k) plans, which involves a a deep level of investment understanding and obligations. If you work with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), the bulk of that liability will go to them.
- Ease of administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll take care of the vast majority of employee education, compliance, and administrative duties for you, so you can enjoy the rewards of offering a plan without much hassle. Moreover, advisors can help integrate contributions with your payroll system for further simplicity. If an employee takes a new job elsewhere, they can simply perform a 401(k) rollover to an IRA or new 401(k) without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in University City, 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:
401(k) Plans
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 opportunities. Employers can make matching contributions as an added benefit to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and undergo yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you turn 50 or older this year, in which case the limit is $30,000.
University City, 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 — The key difference between traditional and Roth deferrals is when your employees pay taxes on their contributions. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, and the employee can then deduct the amount deposited 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 money the employee's already paid taxes on, 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 more popular as they decrease tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be required 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 decides 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 money is taken out of their paycheck unless they choose to opt out or contribute a different amount. The default 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 are meant for people who are self-employed, or a business where the only employee is a spouse. Contributions can be deducted from taxable income and earnings grow tax-deferred until 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 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 considering establishing a 401(k) plan for your small University City, MO business, schedule an appointment with one of our advisers today to discover more about the benefits and options available to you.
How a Financial Advisor Can Help Your University City, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some University City, MO 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 our advisory firm 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 professional retirement consultant. Financial advisors can work 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.
- Establishing and managing a plan — There are specific steps you must take when beginning 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 participant
A financial advisory firm can do all of that for you, and oversee the operation and annual reviews of the plan.
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might show up on a job ad in a list of benefits, but many in the job market don't fully understand what a 401(k) entails. We can connect the words "401(k)" to definite 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 provide investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to best position employees' savings 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 the status of their retirement savings.
- 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 inadvertently fail to comply with a requirement.
- Fiduciary duty — As a plan sponsor, small business owners have a fiduciary duty to act in the best interest of their employees. 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 offers considerable value to University City, MO small business owners who are looking to create a 401(k) plan. By working 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 University City, MO
If you own a small business in University City, MO, you want to focus on why you started your business – not being distracted by administrative tasks you may not have the time, knowledge, or interest to manage. 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 University City, MO business today, call Correct Capital at 314-930-401(k) or contact us online.
