Timing of profit sharing contributions in solo 401(k)

[Guest helpmyretirement]

Let's assume we have an S-corporation (if that matters) with a single owner-employee and a solo 401(k) plan. Let's further assume, for simplicity, the owner-employee pays himself a salary of e.g. $20,000 in April of a given tax (= calendar = plan) year, say 2007, and $80,000 in December 2007.

The owner-employee defers $15,500 of his 2007 April's salary as EE contribution.

He further contributes $25,000 (25% of this year's total salary) in January 2007 as profit sharing contribution.

Questions:

After reading the "final regulations" on timing of contributions, prefunding, etc., does everybody agree that

(1) there's nothing to object to paying salary twice a year, say in Aptil and December; i.e. no regular payroll but irregular payroll;

(2) there's nothing to object to deferring the maximum yearly amount of $15,500 on the first payroll date;

(3) there's nothing to object to contributing the 2007 profit sharing contributions (not "matching contributions") any time during the year, like e.g. in early January 2007.

It looks like most folks belive that the prefunding "final regulations" don't apply to timing of profit sharing contributions (but only matching contributions; and we would just define all contributions as profit-sharing rather than matching), but I wanted to check if this assumption can be taken for granted, and if there might be anything wrong with the above setup. Even though obviously no well-defined payroll period exists in this case, I would think that it can be assumed that the $20,000 salary in April would relate to Jan-March's service. (Must it be defined somewhere what period a payroll payment relates to??) Also, the rule that contributions must not precede related payments or draws seems to apply only to sole proprietors, not to (single shareholder) S-corporations?

Of course we shall assume for the moment that the plan document does not contradict this setup.

Thanks,

[Bird]

I think everything you suggested is fine.