401(k) for small business in Warson Woods, MO. Establishing a 401(k) plan for your small business in Warson Woods, MO provides numerous benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. In addition to attracting top talent, offering a 401(k) plan also offers numerous tax benefits for both employers and employees. However, some business owners may still be wary because of the time involved in setting up and operating a plan, as well as the complex web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Warson Woods, MO financial advisors and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We take the heavy financial lifting off your plate, so you can focus on growing your business while we focus on growing your and your employees' retirement accounts. Speak to a Correct Capital team member today at 314-930-401(k) or complete our online form to get started with creating 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 maintaining a 401(k) for a small business in Warson Woods, MO can do wonders for you, your workers, and your business's bottom line:
- recruit and retain top talent — Providing retirement plans can be a valuable tool 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 your business stand out, especially if you offer 401(k)s to rank-and-file employees as well.
- Tax deductions — Both employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions are not more than the yearly corporate tax deduction limit on employer contributions, as laid out in section 404 of the Internal Revenue Code. The federal government also offers tax credits when businesses first establish a 401(k) plan, and if the employer offers 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.
- Decreased liability — Employers owe a fiduciary duty to their employees when they offer retirement plans, which involves a wide range of investment savvy and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to set up and operate your small business's 401(k), the bulk of that fiduciary duty will be passed onto 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 duties on your behalf, so you can benefit from the rewards of offering a plan without putting in too much work yourself. Additionally, advisors can help integrate contributions with your payroll system 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 Warson Woods, 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 how many employees they have:
In any 401(k) plan, employees can put funds into the account through money taken out of their paychecks. Most 401(k)s have many different investment options. Employers can employers can deposit an equal amount as their employees as an added benefit to employees. Most 401(k) plans must follow rigid nondiscrimination requirements, and undergo 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 turn 50 or older this year, in which case you can contribute an additional $7,500 as a catch-up contribution.
Warson Woods, 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 — Contributions made with a traditional deferral are taxed differently than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning the contributions are made before taxes are taken out, and the employee can then deduct the amount deposited from their taxable income. Taxes are paid when the money is withdrawn.
With Roth deferrals, contributions are made with money the employee's already paid taxes on, meaning the money grows tax-free and the savings and any gains can be withdrawn tax-free, as long as the plan participant has been contributing for at least 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 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, 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 default contribution rate starts at 3% and increases by 1% each year until it maxes out at 6%, unless the employee decides on 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 people who are self-employed, or businesses where the only employees are spouses. Contributions can be deducted from taxable income and the money is taxed when it's withdrawn. This allows participants to save more as they can make contributions both as an employee and a businesses owner. 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 employees. 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 discover more about the benefits and options available to you.
How a Financial Advisor Can Help Small Warson Woods, MO Businesses With Their 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Warson Woods, 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 some of the many ways that our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A few quick internet searches are a poor replacement for decades of experience and working on retirement plans every day. Financial advisors can partner 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.
- Initiating 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
- Develop a record keeping system
- Provide plan information to participant
A financial advisory firm can do all of that for you, and handle the operation and yearly reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The term "401(k)" might show up on a job listing 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 definite steps to people living the golden years of their dreams.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in 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' 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 they're confident with how their money is being held and invested.
- Compliance — Employers must adhere to various rules and contribution limits when offering a 401(k) plan. Not following the rules correctly 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 — When offering a retirement plan, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are morally and legally mandated to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor can provide remarkable value to Warson Woods, MO small business owners who are looking to establish a 401(k) plan. By consulting 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 what you do best and what you're passionate about – 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 Warson Woods, MO business today, call Correct Capital at 314-930-401(k) or contact us online.