401(k) for small business in Westwood, MO. Setting up a 401(k) plan for your small business in Westwood, MO can offer various benefits to both employers and employees, 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 can also help both businesses and employees reduce their tax liability. However, some business owners might not be sure if they want to move forward because of the time commitment, as well as the complexities of investment and financial regulations.
At Correct Capital Wealth Management, our Westwood, MO financial advisors 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 while you focus on your business. Call Correct Capital today at 877-930-4015 or contact us online to get started with setting up 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 can do wonders for you, your employees, and your business goals alike:
- recruit and keep great talent — Providing a 401(k) plan can be an important asset for recruiting and keeping top talent, particularly if many Westwood, MO companies are hiring for the same position. 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 management.
- Tax deductions — Both businesses and employees can reduce their tax liability with a 401(k) plan. Matching contributions from employers are tax deductible to the extent that the contributions do not surpass the annual corporate tax deduction limit on employer contributions, as defined 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. Employee contributions reduce their tax liability and their contributions grow tax free.
- Increased financial security for employees — A retirement account allows employees to feel better about how they'll spend their golden years. Greater financial security eventually leads to a more productive workforce.
- Reduced liability — Employers owe a fiduciary duty to their employees when they offer 401(k) plans, which involves a wide range 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), the bulk of that liability will go to 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 vast majority of employee education, compliance, and administrative tasks on your behalf, so you can reap the rewards of offering a plan without much hassle. Furthermore, advisors can help with 401(k) payroll integration for further simplicity. If an employee moves to a new company, they can easily rollover their 401(k) to an IRA or new 401(k) without much hassle to you.
Types of 401(k) Plans For Your Small Business 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:
401(k) Plans
In any 401(k) plan, employees can contribute through money taken out of their paychecks. Most 401(k)s offer a wide range of investment opportunities. Employers can make matching contributions as an added perk to employees. Most 401(k) plans must follow stringent nondiscrimination requirements, and undergo yearly tests to ensure they remain compliant. The IRS mandates 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 — Contributions made with a traditional deferral are taxed differently than with a Roth deferral. With a traditional deferral, contributions are tax-deferred, meaning the contributions are made 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 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, 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 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 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 default contribution rate starts at 3% and increases by 1% annually until it reaches a maximum of 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 people who are self-employed, or businesses where the only employees are spouses. Contributions are tax deductible and gains grow tax-deferred until the money is taken out. This allows participants to make higher contributions as they can make contributions both as an employee 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 considering setting up a 401(k) plan for your small Westwood, MO business, schedule an appointment with a member of our team today to get started.
How a Financial Advisor Can Help Your Westwood, MO Small Business With Your 401(k) Plans
Given the benefits of a small business offering a 401(k) plan, some Westwood, MO employers may still be cautious, as managing a 401(k) plan is complex and time-consuming. 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 offering the same level of skill and experience as a professional retirement consultant. Financial advisors can partner with small business owners to develop 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.
- Setting up and operating a plan — There are numerous requirements you must adhere to when establishing 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and handle the operation and annual reviews of your 401(k).
- Marketing your 401(k) plan to those in the job market — The phrase "401(k)" might appear on a job listing as a bullet point, but many in the job market don't know the full benefits a plan provides. We can bridge the words "401(k)" to concrete 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 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 best 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 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 them can lead to stiff fines. A financial advisor can help to ensure your recordkeeper and plan administrator do not inadvertently break with the regulations.
- Fiduciary duty — 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 mandated to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers remarkable value to Westwood, MO small business owners who are looking to set up a 401(k) plan. By working 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 Start 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 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 Westwood, MO business today, call Correct Capital at 877-930-4015 or contact us online.
