401 (k) for small business in Webster Groves, MO. Creating a 401(k) plan for your small business in Webster Groves, MO provides various benefits to both employers and employees, helping businesses stand out and provide a more secure to their employees. Beyond just attracting great employees, providing a 401(k) plan also offers numerous tax benefits for both employers and employees. But, some business owners may still be wary because of the time commitment, as well as the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Webster Groves, MO financial advisors and retirement consultants work with companies large and small to offer 401(k) plans that fit what their business needs and what their employees want. We take the heavy financial lifting off your plate while you focus on your business. Speak to a Correct Capital team member today at 314-930-401(k) or complete our online form to learn more about setting up a 401(k) for your small business in Webster Groves, MO.
Do I Need a 401(k) For My Webster Groves, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Webster Groves, MO has numerous benefits, for employers, your workers, and your business's bottom line:
- Attract and retain top employees — Providing retirement plans can be an important tool for attracting and keeping top talent, particularly if many Webster Groves, MO companies are advertising for the same job. 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 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, which is 25% of covered payroll. The federal government also offers tax credits for first-time 401(k) plans and offering automatic enrollment. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased employee retirement savings — A 401(k) plan allows employees to feel more confident about how they'll live in retirement. Greater financial security ultimately leads to a more productive workforce.
- Reduced liability — Employers owe a fiduciary responsibility to their employees when they provide retirement plans, which involves a a deep level of investment understanding and obligations. If you work with an ERISA 3(38) Fiduciary provider to assist you with your small business's 401(k), much of that liability will go to them.
- Simple administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll take care of the critical tasks of employee education, compliance, and administrative tasks on your behalf, so you can enjoy 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 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 Webster Groves, 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 diversity of investment opportunities. Employers can employers can deposit an equal amount as their employees as an additional benefit to employees. Most 401(k) plans must meet strict nondiscrimination requirements, and are subject to yearly tests to ensure the plan doesn't favor highly compensated employees. The IRS sets contribution limits each year; in 2023 that is $22,500, unless you are 50 or older, 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 things to think about when setting up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — Contributions made with a traditional deferral are taxed at different times than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning the money is deposited before taxes are taken out, lowering an employee's 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 the savings and any gains can be withdrawn tax-free, so 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 more popular as they allow plan participants to diversify their tax exposure 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 fully vested contributions to your employees' plans. To meet Safe Harbor requirements, you have four options:
- In a non-elective contribution, an employer must contribute 3% of each eligible employee's compensation to the plan, regardless of whether 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 have a percentage of their pay contributed to the plan unless they decide not to. The default contribution rate starts at 3% and increases by 1% every year until it maxes out at 6%, unless the employee elects a different contribution rate.
In exchange for mandatory employer contributions, Safe Harbor plans are not 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 are tax deductible and the money is taxed when it's withdrawn. 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 are not subject to annual filings with the IRS unless the account balance is more than $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 Webster Groves, MO business, schedule an appointment with a member of our advisor team today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Your Webster Groves, MO Small Business With Your 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Webster Groves, MO employers might still be uneasy, as they may not have the know-how, time, or interest to establish and operate a plan. That’s where we come in. 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 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 create 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.
- Establishing and managing a plan — There are specific steps you must take 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 annual reviews of the plan.
- Marketing your 401(k) plan to those in the job market — The word "401(k)" might show up on a job ad as a bullet point, 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 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 market insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to optimally position employees' money for further growth.
- Employee education — Employees need to understand their plan in order to get the greatest reward from it. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' employees so they're confident with how their money is being held and invested.
- Compliance — Employers must abide by certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to stiff 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 responsibility 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 can provide considerable value to Webster Groves, MO small business owners who are looking to create a 401(k) plan. By consulting 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 spend your energy on what you do best and what you're passionate about – not being bogged down 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 314-930-401(k) or contact us online.
