Gross up a partner's earned income by after-tax employee contributions?

I have a partnership that is husband wife with no employees so it is a "one-participant" plan per the definition. We started a 401(k) plan for them in 2021 and are trying to max out their contributions to $58,000 each using elective deferrals, profit sharing and after-tax employee contributions. The husband's self-employment income on his K-1 was $120,189 and the wife's was $118,664. They each want to make a $19,500 elective deferral and a maximum profit sharing contribution and then they want to max the rest with after-tax employee contributions that we will convert to Roth immediately after funding using an in-plan Roth rollover. I know you can "gross-up" earned income by the amount of their elective deferrals when calculating what their 415 compensation is and also when calculating the deduction limit. However, do the after-tax employee contributions reduce earned income for these purposes? I would think you would treat them the same as elective deferrals and these contributions would come out of earned income, not reduce it. My software is reducing earned income by the amounts of after-tax employee contributions and it is making my deduction limit lower and forcing my profit sharing contribution to be less. Any help with this would be appreciated. I have researched the ERISA Outline book and couldn't find anything. 

Thanks, 

What are the numbers?

I’ll just share the husbands numbers. His Self-employment income is 120,189. One half of the self employment tax is 8,491.08. After deducting this his net earnings from self employment before his employer contribution to himself is 111,697.92. Multiply this by (.25/1.25) to get his maximum employer contribution of 22,339.58 making his earned income 89,358.34 (111,697.92 - 22,339.58). From his earned income he makes his 19,500 deferral to the plan. Between his deferral and employer contribution he has contributed 41,839.58. To max him to the 415 limit of 58,000 I want to do a 16,160.42 after-tax employee contribution. My question is does this come out of earned income like the deferral and leave the deduction limit at 25% of 89,358.34 (this equals my employer contribution of 22,339.58) or does it reduce earned income to 73,197.92 and in turn reduce my deduction limit. My software is having it reduce the earned income and then I fail the deduction limit test but I think you should treat the after-tax employee contribution similar to deferrals but I can’t find a definitive answer. 

Perhaps this is academic, but don't after-tax contributions have to be made by January 30?

2 hours ago, Bill Presson said:

Perhaps this is academic, but don't after-tax contributions have to be made by January 30?

Even for partners who may not know their numbers until well after 1/30?

I think so according to this: 26 CFR 1.415(c) 1(b)(6)(i)(C) Date of employee contributions.  For purposes of this paragraph (b), employee contributions, whether voluntary or mandatory, are not treated as credited to a participant's account for a particular limitation year unless the contributions are actually made to the plan no later than 30 days after the close of that limitation year.

Self employed individuals have an exception to the normal payment timing rules for making deferrals to ensure they have enough earned income. I think it would be reasonable to allow an exception for this as well since it is very similar to deferrals and I’m sure you could make your case with any auditor. 

However, assuming this was all done in January I’m still not sure about my original question. 

After tax contributions are..."after tax" so IMO they have no impact on compensation.  No grossing up or down or whatever.

That is what my thought was as well. Thank you.

If they later turn out to be a 415 violation, correct them thusly.