401(k) for small business in Warson Woods, MO. Setting up a 401(k) plan for your small business in Warson Woods, 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 also provides numerous tax benefits for both employers and employees. However, some business owners might not be sure if they want to move forward because of the time commitment, in addition to the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Warson Woods, MO financial advisors and retirement consultants help companies of all sizes 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 making your business flourish. Call Correct Capital today at 877-930-4015 or complete our online form to get started with setting up a 401(k) for your small business in Warson Woods, MO.
Benefits of Setting Up a 401(k) for Your Small Warson Woods, MO Business
Establishing and operating a 401(k) for a small business in Warson Woods, MO has numerous benefits, for employers, your employees, and your business's bottom line:
- recruit and keep great employees — Providing retirement plans can be a valuable asset for recruiting and keeping top talent, particularly in a competitive Warson Woods, MO job market. 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 reduce how much they owe in taxes with a 401(k) plan. Matching contributions employers make are tax deductible up to the yearly corporate tax deduction limit on employer contributions, as defined in section 404 of the Internal Revenue Code. 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 feel more confident about how they'll spend their golden years. Greater financial security eventually leads to more productivity.
- Decreased liability — Employers take on a fiduciary responsibility to their employees when they provide 401(k) plans, which involves a a deep level of investment savvy and obligations. If you work with an ERISA 3(38) Fiduciary provider to establish and manage your small business's 401(k), most of that fiduciary duty will be placed on them.
- Ease of administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the critical tasks of employee education, compliance, and administrative tasks on your behalf, so you can reap the rewards of offering a plan without much hassle. Furthermore, 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 Warson Woods, 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:
401(k) Plans
In any 401(k) plan, employees can contribute through payroll deductions. Most 401(k)s offer a diversity of investment options. Employers can make matching contributions as an additional perk to employees. Most 401(k) plans must abide by rigid nondiscrimination requirements, and perform annual 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.
Warson Woods, MO employers with multiple employees have a few different considerations to make when setting up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The key difference between traditional and Roth deferrals is the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited 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 there are no taxes when the money's withdrawn, so long as the plan participant has been contributing for at least five years and is 59-½ years old when the money is taken out. Roth 401(k)s are becoming more popular as they reduce tax liability in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as a business owner 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, whether or not 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 decide not to. The automatic contribution rate starts at 3% and increases by 1% each year until it reaches a maximum of 6%, unless the employee decides on 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 are meant for people who are self-employed, or a business where the only employee is a spouse. Contributions are tax deductible and savings grow tax-deferred until withdrawn. This allows participants to make higher contributions 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 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 thinking of establishing a 401(k) plan for your small Warson Woods, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Your Warson Woods, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Warson Woods, MO employers might still be wary, 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 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 quick internet searches can't come close to offering the same degree of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to design a 401(k) plan meant specifically to benefit their business. They can help choose the plan that most benefits you, set up contribution and matching formulas, and establish eligibility requirements.
- Setting up and managing 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 do all of that for you, and handle the operation and yearly reviews of the plan.
- Marketing your 401(k) plan to potential employees — The word "401(k)" might show up on a job ad as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. We can connect 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 experienced with portfolio management will be able to offer investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' savings for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will help 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 abide by certain regulations when offering a 401(k) plan. Not following them can lead to harsh fees. A financial advisor can help to ensure all of the proper rules are followed.
- 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 obligated to do what's in your best interest, and in the best interest of your employees and their funds.
A financial advisor can provide considerable value to Warson Woods, MO small business owners who want to experience the benefits of a 401(k) plan. By partnering 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 Set Up a 401(k) For Your Small Business in Warson Woods, MO
If you own a small business in Warson Woods, MO, you want to focus on why you started your business – 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 Warson Woods, MO business today, call Correct Capital at 877-930-4015 or contact us online.
