401(k) for small business in Wildwood, MO. Initiating a 401(k) plan for your small business in Wildwood, 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, offering a 401(k) plan can also help both businesses and employees reduce their tax liability. However, some business owners may still be cautious because of the time commitment, as well as the complex web of regulations, laws, and investment options available.
At Correct Capital Wealth Management, our Wildwood, MO financial planners and retirement consultants help companies of all sizes offer customized and successful 401(k) plans. 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' savings. 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 Wildwood, MO.
Why You Should Up a 401(k) for Your Small Wildwood, MO Business
Setting up and maintaining a 401(k) for a small business in Wildwood, MO can do wonders for you, your employees, and your business goals alike:
- recruit and keep great employees — Providing retirement plans can be an important tool for attracting and retaining skilled talent, particularly in a competitive Wildwood, MO job market. Employees see a 401(k) as a valuable benefit, 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 benefits — Both businesses and employees can reduce their tax liability with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions do not exceed the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. There are also several tax credits when businesses first set up a 401(k) plan, and if the employer offers automatic enrollment. Employee contributions reduce their taxable income and their contributions grow tax free.
- Increased financial security for employees — A retirement account allows employees to save for retirement through automatic contributions deducted from their paychecks. Greater financial security eventually leads to more productivity.
- Reduced liability — Employers assume a fiduciary duty to their employees when they offer retirement plans, which involves a a deep level of investment comprehension and responsibilities. If you work with an ERISA 3(38) Fiduciary advisor to set up and operate your small business's 401(k), the bulk of that fiduciary duty will be placed on them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the vast majority of employee education, compliance, and administrative responsibilities on your behalf, so you can enjoy the rewards of offering a plan without putting in too much work yourself. Furthermore, advisors can help integrate contributions with your payroll system for further simplicity. If an employee moves to a new company, they can easily rollover their 401(k) to a new retirement account without much hassle to you.
What 401(k) Plans Are Available to Small Businesses in Wildwood, 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 how many employees they have:
401(k) Plans
In any 401(k) plan, employees can put savings into the account through payroll deductions. Most 401(k)s have a diversity of 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 adhere to stringent 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 you can deposit an additional $7,500 as a catch-up contribution.
Wildwood, MO employers with multiple employees have a few different considerations to make when setting up their 401(k) plan:
- Traditional vs. Roth 401(k) Deferrals — The key difference between traditional and Roth deferrals is the tax benefits. With a traditional deferral, contributions are tax-deferred, meaning it is pre-tax money, 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 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 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 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 part of their pay contributed to the plan unless they choose to opt out or contribute a different amount. The automatic contribution rate starts at 3% and increases by 1% annually until it maxes out at 6%, unless the employee elects a different contribution rate.
In exchange for obligatory employer contributions, Safe Harbor plans are not 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 earnings grow tax-deferred until the money is taken out. 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 do not require annual filings with the IRS unless the account balance exceeds $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 Wildwood, MO business, schedule a meeting with one of our advisers today to get started.
How a Financial Advisor Can Help Small Wildwood, MO Businesses With Their 401(k) Plans
Even considering the great things a 401(k) plan can do for a small business, some Wildwood, MO employers may still be wary, 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 few quick internet searches can't come close to offering the same degree of skill and experience as a licensed advisory firm. Financial advisors can partner with small business owners to create 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.
- Setting up and managing a plan — There are numerous requirements you must adhere to 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 eligible employees
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 phrase "401(k)" might appear on a job ad in a list of benefits, but many in the job market don't know the full benefits a plan provides. We can connect the words "401(k)" to definite 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 offer investment insight, as well as work within investment principles such as diversification, risk tolerance, and rebalancing to optimally position employees' savings for further growth.
- Employee education — The more an employee understands their 401(k) plan, the more it will help them. At Correct Capital, we offer both group classes and one-on-one counseling sessions with our small business clients' employees so feel at ease with how their money is being held and invested.
- Compliance — 401(k) plans have different rules and contribution limits. Not following the rules correctly can lead to stiff penalties. 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 with diligence, prudence, and care. We are morally and legally required to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor can provide considerable value to Wildwood, 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 save on taxes and make their business more attractive to current and potential employees.
Call Correct Capital to Start a 401(k) For Your Small Business in Wildwood, MO
If you own a small business in Wildwood, MO, you want to spend your time on why you started your business – 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 Wildwood, MO business today, call Correct Capital at 877-930-4015 or contact us online.
