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 you and the people that work for you, helping businesses offer more security and benefits to people in the job market. In addition to attracting top talent, providing a 401(k) plan also offers numerous tax benefits for both employers and employees. But, some business owners might not be confident they want to proceed because of the time involved in establishing and maintaining an account, as well as the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Westwood, 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 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 contact us online to get started with establishing a 401(k) for your small business in Westwood, MO.
Should I Establish a 401(k) For My Westwood, MO Small Business?
Setting up and operating a 401(k) for a small business in Westwood, MO has numerous benefits, for you, your workers, and your business goals alike:
- Attract and keep top talent — Offering retirement plans can be a valuable asset for attracting and retaining top talent, particularly if many Westwood, MO companies are hiring for the same position. One survey says 401(k) plans are the most important financial benefit to employees, and offering one can help differentiate your business from competitors, 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 up to the annual corporate tax deduction limit on employer contributions, as defined in section 404 of the Internal Revenue Code. There are also several tax credits for first-time 401(k) plans and offering automatic enrollment. Employees enjoy 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 take on a fiduciary duty to their employees when they provide 401(k) plans, which involves a wide range of investment comprehension and obligations. If you partner with an ERISA 3(38) Fiduciary provider to initiate and operate your small business's 401(k), most of that fiduciary duty will be placed on them.
- Ease of administration — When you parter with a 3(16) administrator to set up your small business 401(k) plan, they'll manage the critical tasks of employee education, compliance, and administrative duties on your behalf, so you can enjoy 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 company, 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 Westwood, MO?
Depending on your industry, your "small business" may have up to 1,500 employees, or it may just be yourself. However many employees you have, there is a 401(k) plan that will work for you:
In any 401(k) plan, employees can put savings into the account through money taken out of their paychecks. Most 401(k)s offer a diversity of investment options. Employers can make matching contributions as an additional benefit to employees. Most 401(k) plans must adhere to rigid nondiscrimination requirements, and are subject to annual 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 businesses with multiple employees have a few different things to think about when setting 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, lowering an employee's 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 had the account for five years and is 59-½ years old when the money is taken out. Roth 401(k)s are becoming increasingly 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 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, whether or not the employee decides to contribute to the plan.
- 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 automatic contribution rate starts at 3% and increases by 1% every 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
Solo and Individual 401(k) plans are are meant for owner-only businesses, 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 save more 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 exceeds $250,000.
The "best" plan for your will depend on your business and employees. If you're interested in establishing a 401(k) plan for your small Westwood, MO business, schedule a meeting with one of our advisers today to learn more about the benefits and options available to you.
How a Financial Advisor Can Help Small Westwood, MO Businesses With Their 401(k) Plans
Given the great things a 401(k) plan can do for a small business, some Westwood, MO employers might still be cautious, as they may not have the know-how, 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 handful of detailed Google searches are a poor replacement for years of experience and everyday interaction with retirement plans. 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 most benefits you, 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 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 oversee the operation and annual reviews of the plan.
- Marketing your 401(k) plan to potential employees — The word "401(k)" might appear on a job ad in a list of benefits, 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 concrete images of a more secure retirement, with a clear road map of how to get there.
- Investment selection — Financial advisors who are an Accredited Investment Fiduciary® (AIF®) and are well versed in portfolio management will be able to provide investment 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 — 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 the status of their retirement savings.
- Compliance — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to stiff fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally fail to comply with a requirement.
- Fiduciary responsibility — When offering a retirement plan, small business owners have a fiduciary responsibility to act with diligence, prudence, and care. We are ethically and legally bound 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 Westwood, MO small business owners who want to experience the benefits of a 401(k) plan. By working 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 Westwood, MO
If you own a small business in Westwood, 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 Westwood, MO business today, call Correct Capital at 314-930-401(k) or contact us online.