Not too good to be true is it?

Owner and one employee have 3+ years of service.  Owners spouse is hired 1/1/2025 and there are no other employees.  If I disaggregate for testing, the Otherwise Excludable portion of the test passes by default so I can give the spouse whatever percentage of pay I want.  The owner's comp is $250K.  I can give the spouse say $85% of their $50,000 or so and as long as my total contributions are wthin the max deductible, I should be good.

This is seems to good to be true but it seems to me that it will work. Anyone think I am wrong here?

Seems okay, if the document allows, and again, “if” no one else new works any hours in 2025. You could allocate a full $50,000 if you’re not over the deduction limit.

If they would turn age 50-59, or age 64 or more this year, then you could allocate $57,500 between deferrals and ER PS if they deferred at least $7,500 (again watch the ER contribution deduction limit.

And if turning age 60-63 this year, and deferring at least $11,250, then you could allocate $61,250. Again, watch the deduction limit overall.

If hired before 7/2/2025, then next year the honeymoon is over, and safe harbor would be in order.

But really, the owner will likely want to defer in 2025, so just do the 3% safe harbor for 2025. Then talk about doing SH match for 2026 if the 3% is so costly that they just cant stand it.

On 1/26/2025 at 3:52 PM, John Feldt ERPA CPC QPA said:

“if” no one else new works any hours in 2025.

I am glad you mentioned this because it would of course be an important caveat!