401 (k) for small business in Westwood, MO. Initiating a 401(k) plan for your small business in Westwood, MO can offer numerous benefits to both employers and employees, helping businesses stand out and provide long-term financial security 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 may still be cautious because of the time commitment, in addition to the intricate web of regulations, laws, and investment opportunities available.
At Correct Capital Wealth Management, our Westwood, 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 while you focus on making your business flourish. Call Correct Capital 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 Westwood, MO.
Should I Establish a 401(k) For My Westwood, MO Small Business?
Establishing and maintaining a 401(k) for a small business in Westwood, MO has numerous benefits, for employers, your employees, and your business's bottom line:
- Attract and retain great employees — Offering a 401(k) plan can be an essential tool for attracting and keeping high-performing talent, particularly in a competitive Westwood, MO job market. Employees see a 401(k) as a valuable benefit, and offering one can help your business stand out, especially if they are offered to people beyond the highest ranking employees.
- Tax benefits — Both employers 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, as defined in section 404 of the Internal Revenue Code. There are also several tax credits when companies first establish a 401(k) plan, and if the employer offers 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 eventually leads to a more productive workforce.
- Decreased liability — Employers assume a fiduciary duty to their employees when they provide 401(k) plans, which involves a wide range of investment savvy and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to initiate and manage your small business's 401(k), much of that liability will be passed onto them.
- Ease of administration — When you parter with a 3(16) administrator to establish your small business 401(k) plan, they'll manage the vast majority of employee education, compliance, and administrative responsibilities for you, so you can enjoy the rewards of offering a plan without putting in too much work yourself. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, they can simply rollover their 401(k) to a new retirement account without you having to do much work.
What 401(k) Plans Are Available to Small Businesses in Westwood, 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:
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s offer many different investments that may include mutual funds, index funds, bonds, and company stock. Employers can employers can deposit an equal amount as their employees as an added benefit to employees. Most 401(k) plans must meet 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 turn 50 or older this year, in which case the limit is $30,000.
Westwood, MO companies 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 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 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 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 decrease tax liability in retirement.
- Safe Harbor Provision — If you opt for this provision, as an employer you would be obligated to make fully vested contributions to your employees' plans. 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, 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 money is taken out of their paycheck unless they choose to opt out or contribute a different amount. 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 company would not be subject to nondiscrimination testing.
Solo or Individual 401(k) Plan
These are are meant for people who are self-employed, or a business where the only employee is a spouse. Contributions can be deducted from taxable income and gains grow tax-deferred until withdrawn. This allows participants to make higher contributions as they can make contributions both as a worker 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 surpasses $250,000.
What plan works best for your and your employees depends on your business and your and your employees' needs. If you're interested in establishing a 401(k) plan for your small Westwood, MO business, schedule a meeting with a member of our team today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Your Westwood, MO Small Business With Your 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Westwood, 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 ways that our advisory firm can help make your life easier in regards to your small business's 401(k) plan:
- Plan design — A few detailed Google searches can't come close to offering the same level of skill and experience as a professional retirement consultant. Financial advisors can work 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 plan that works best for you, set up contribution and matching formulas, and establish eligibility requirements.
- Initiating and operating a plan — There are numerous requirements you must follow when initiating your small business 401(k). You must:
- 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 do all of that for you, and manage the operation and yearly reviews of the plan.
- Advertising your 401(k) plan to prospective employees — The term "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 words "401(k)" to specific images of a more secure retirement, with very clear stepping stones on how to get there.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are qualified to perform portfolio management will be able to offer market insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best position employees' money for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will benefit them. 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 the status of their retirement savings.
- 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 all of the proper rules are followed.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interest of plan participants. We are ethically and legally required to do what's in your best interest, and in the best interest of your employees and their savings.
A financial advisor offers significant value to Westwood, MO small business owners who want to experience the benefits of 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 Westwood, MO
If you own a small business in Westwood, MO, you want to spend your time on why you started your business – 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 Westwood, MO business today, call Correct Capital at 314-930-401(k) or contact us online.