401(k) for small business in Webster Groves, MO. Creating a 401(k) plan for your small business in Webster Groves, MO can offer numerous benefits to both you and the people that work for you, helping businesses stand out and provide a more secure to their employees. 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 might not be sure if they want to proceed because of the time commitment, as well as the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Webster Groves, MO financial advisors 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 877-930-4015 or contact us online to learn more about setting up a 401(k) for your small business in Webster Groves, MO.
Benefits of Setting Up a 401(k) for Your Small Webster Groves, MO Business
Setting up and maintaining a 401(k) for a small business in Webster Groves, MO can do wonders for employers, your employees, and your business's bottom line:
- Attract and retain top talent — Providing a 401(k) plan is an essential tool for attracting and retaining top talent, particularly if many Webster Groves, MO companies are hiring for the same job. 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 businesses and employees can reduce how much they owe in taxes with a 401(k) plan. Matching contributions from employers are tax deductible up to the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. The federal government also offers tax credits when companies first set up a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their taxable income and their contributions grow tax free.
- Increased employee retirement savings — A 401(k) plan 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 owe a fiduciary duty to their employees when they offer retirement plans, which involves a a deep level of investment savvy and obligations. If you partner with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), most of that fiduciary duty will be placed on them.
- Simple 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 responsibilities for you, so you can reap the rewards of offering a plan without putting in too much work yourself. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new job elsewhere, they can simply 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 Webster Groves, MO?
Small businesses, depending on what type of company they are, can have anywhere from one to 1,500 employees. 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 put savings into the account through payroll deductions. 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 additional benefit to employees. Most 401(k) plans must abide by strict nondiscrimination requirements, and perform yearly tests to ensure they remain compliant. The IRS mandates contribution limits each year; in 2023 that is $22,500, unless you turn 50 or older this year, in which case you can deposit an additional $7,500 as a catch-up contribution.
Webster Groves, 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 the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited 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 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 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. There are four ways in which an employer can 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 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% annually until it reaches a maximum of 6%, unless the employee elects 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 people who are self-employed, 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 make higher contributions as they can make contributions both as an employee and an employer. 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.
The "best" plan for your will depend on your business and employees. If you're interested in setting up a 401(k) plan for your small Webster Groves, MO business, schedule an appointment with one of our advisers today to get started.
How a Financial Advisor Can Help Small Webster Groves, MO Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Webster Groves, 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 a financial advisor can help. Here are some some of the many ways that a financial advisor can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few quick internet searches can't come close to offering the same degree of skill and experience as a licensed advisory firm. Financial advisors can work with small business owners to create 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.
- Setting up and operating a plan — There are numerous requirements you must follow when beginning 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 eligible employees
A financial advisory firm can do all of that for you, and handle the operation and annual reviews of the plan.
- Marketing your 401(k) plan to those in the job market — The phrase "401(k)" might show up on a job ad in a list of benefits, but many in the job market don't know the full benefits a plan provides. We can connect the words "401(k)" to specific 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 provide investment insight, as well as work within investment concepts 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 speak directly to your small business's employees so feel at ease 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 penalties. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- 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 savings.
A financial advisor can provide significant value to Webster Groves, MO small business owners who are looking to set up 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 Establish a 401(k) For Your Small Business in Webster Groves, MO
If you own a small business in Webster Groves, MO, you want to focus on why you started your business – not being distracted by retirement plan responsibilities 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 Webster Groves, MO business today, call Correct Capital at 877-930-4015 or contact us online.
