401 (k) for small business in Wildwood, MO. Initiating a 401(k) plan for your small business in Wildwood, MO provides numerous benefits to both employers and employees, helping businesses stand out and provide long-term financial security to their employees. Beyond just offering more benefits than competitors, providing a 401(k) plan can also help both businesses and employees lower their tax liability. But, some business owners may still be cautious because of the time involved in setting up and operating a plan, as well as the complexities of investment and financial laws.
At Correct Capital Wealth Management, our Wildwood, MO financial planners and retirement consultants work with companies large and small to offer customized and effective 401(k) plans. We do the financial and administrative work for you while you focus on making your business thrive. Call Correct Capital today at 314-930-401(k) or contact us online to get started with establishing a 401(k) for your small business in Wildwood, MO.
Should I Establish a 401(k) For My Wildwood, MO Small Business?
Setting up and operating a 401(k) for a small business in Wildwood, MO can do wonders for you, your employees, and your business's bottom line:
- recruit and retain top employees — Providing retirement plans can be an essential tool for recruiting and keeping top talent, especially in a competitive Wildwood, MO job market. 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 they are offered to people beyond the highest earners.
- Tax deductions — Both employers and employees can benefit from tax advantages with a 401(k) plan. Matching contributions employers make are tax deductible to the extent that the contributions do not surpass the yearly corporate tax deduction limit on employer contributions, which is 25% of covered payroll. 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 401(k) plan allows employees to feel better about how they'll spend their golden years. Greater financial security eventually leads to a more productive workforce.
- Decreased liability — Employers assume a fiduciary responsibility to their employees when they offer retirement plans, which involves a a deep level of investment knowledge and obligations. If you partner with an ERISA 3(38) Fiduciary advisor to establish and manage your small business's 401(k), much of that fiduciary duty will go to them.
- Simple administration — When you parter with a 3(16) administrator to administer your small business 401(k) plan, they'll manage the lion's share of employee education, compliance, and administrative tasks on your behalf, so you can reap the rewards of offering a plan without much nuisance. Additionally, advisors can help with 401(k) payroll integration for further simplicity. If an employee takes a new job elsewhere, 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. 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 have many different investment opportunities. Employers can employers can deposit an equal amount as their employees as an additional perk 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 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.
Wildwood, MO companies 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 when your employees pay taxes on their contributions. With a traditional deferral, contributions are tax-deferred, meaning the contributions are made before taxes are taken out, lowering an employee's 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 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 allow employees to diversify their tax exposure in retirement.
- Safe Harbor Provision — If you decide to set up a Safe Harbor 401(k), as an employer you would be obligated to make contributions that are fully vested when made. 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 have a percentage of their pay contributed to the plan unless they decide not to. The default contribution rate starts at 3% and increases by 1% every year until it reaches a maximum of 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
These are are meant for owner-only businesses, 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 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 do not require 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 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 benefits of a small business offering a 401(k) plan, some Wildwood, 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 our advisory firm can assist with your small business’s 401(k) plan:
- Plan design — A few detailed Google searches are a poor replacement for decades of experience and working on retirement plans every day. Financial advisors can work with small business owners to design a 401(k) plan that meets the specific needs of their business and employees. 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 numerous requirements you must adhere to 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 eligible employees
A financial advisory firm can assist with all of the above requirements, and oversee the operation and yearly reviews of your 401(k).
- Marketing your 401(k) plan to potential employees — The term "401(k)" might appear on a job listing as a bullet point, but many in the job market don't fully understand what a 401(k) can do for them. 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 offer investment insight, as well as work within investment concepts such as diversification, risk tolerance, and rebalancing to best 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 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 fees. A financial advisor can help to ensure your recordkeeper and plan administrator do not accidentally break with the regulations.
- Fiduciary responsibility — As a plan sponsor, small business owners have a fiduciary responsibility to act in the best interest of their employees. We are morally and legally bound to do what's in your best interest, and in the best interest of your employees and their retirement accounts.
A financial advisor offers significant value to Wildwood, 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 prospective 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 focus on what you do best and what you're passionate about – 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 314-930-401(k) or contact us online.