401(k) for small business in Wentzville, MO. Setting up a 401(k) plan for your small business in Wentzville, MO can offer various benefits to both employers and employees, helping businesses offer more security and benefits to people in the job market. Beyond just 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 cautious because of the time involved in establishing and maintaining an account, in addition to the complex web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Wentzville, MO financial planners and retirement consultants help companies of all sizes offer 401(k) plans that fit their business and provide stability for their employees. We do the financial and administrative work for you, 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 877-930-4015 or contact us online to get started with setting up a 401(k) for your small business in Wentzville, MO.
Should I Establish a 401(k) For My Wentzville, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Wentzville, MO has numerous benefits, for you, your employees, and your business goals alike:
- Attract and retain top employees — Offering a 401(k) plan can be an important tool for attracting and keeping top talent, particularly in a competitive Wentzville, MO job market. One survey says 401(k) plans are the most important financial benefit to employees, 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 benefit from tax advantages with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not exceed 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 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 save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to more productivity.
- Decreased liability — Employers owe a fiduciary responsibility to their employees when they provide retirement plans, which involves a wide range of investment comprehension and responsibilities. If you partner with an ERISA 3(38) Fiduciary advisor to assist you with your small business's 401(k), most of that liability will be passed onto them.
- Ease of administration — When you offer your small business 401(k) plan with a 3(16) administrator, they'll handle the vast majority of employee education, compliance, and administrative responsibilities for you, so you can benefit from 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 moves to a new job elsewhere, they can effortlessly 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 Wentzville, 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 money taken out of their paychecks. Most 401(k)s offer many different investment opportunities. Employers can employers can deposit an equal amount as their employees as an additional benefit to employees. Most 401(k) plans must follow rigid nondiscrimination requirements, and perform yearly tests to ensure they remain compliant. The IRS sets contribution limits each year; in 2023 the limit is $22,500, unless you are 50 or older, in which case the limit is $30,000.
Wentzville, 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 — The main 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 contributed 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 after-tax dollars, meaning the money grows tax-free and there are no taxes when the money's withdrawn, 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 decrease 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 obligated to make contributions that are fully vested when made. 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 have a part of their pay contributed to the plan 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 chooses 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
Solo and Individual 401(k) plans are are meant 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 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 is more than $250,000.
What plan works best for your and your employees depends on your business and employees. If you're interested in opening a 401(k) plan for your small Wentzville, MO business, schedule a meeting with a member of our team today to get started.
How a Financial Advisor Can Help Your Wentzville, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Wentzville, MO employers may 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 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 handful of detailed Google searches can't come close to providing the same degree of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to create a 401(k) plan meant expressly to benefit their company. They can help choose the right type of plan, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating 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 assist with all of the above requirements, and manage the operation and annual reviews of your 401(k).
- Advertising your 401(k) plan to those in the job market — The term "401(k)" might appear 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 phrase "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 well versed in 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' funds 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 talk directly to your small business's employees so feel at ease with how their money is being held and invested.
- Compliance — Employers must adhere to certain regulations when offering a 401(k) plan. Not following the rules correctly can lead to stiff 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 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 Wentzville, 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 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 Wentzville, MO
If you own a small business in Wentzville, MO, you want to spend your energy on what you do best and what you're passionate about – not being bogged down 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 Wentzville, MO business today, call Correct Capital at 877-930-4015 or contact us online.
