401(k) Profit Sharing Maximum Contribution Help
Hello. I have am the owner of a single member LLC. I have one employee (my wife) and file a schedule C. I have a solo 401(k) plan and I'm a little confused on how much I can contribute to my wife's (or other employees if I hire any later) portion of the 401(k). I've found all sorts of stuff on how much I can put in for myself, but I'm having trouble finding clear instructions on what I can contribute for her (she is not a partner or owner, just a "regular" employee). I know she can elect to defer $17,500 this year and I'm going to max that out, but I'm confused on how much the non-elective contribution can be. I know that the maximum overall amount is $52,000 this year, but I'm confused by the IRS website. It states that the overall limit is the lesser of $52,000 or 100% of her compensation. It also says "Employers can deduct amounts not exceeding 25 percent of aggregate compensation for all participants..."
I would like to put as much money as possible into the 401(k) for her. The way I am reading it is that I can only put up to 25% of her pay as a profit sharing contribution. Is that correct?
Let's assume she was paid $25,000 and $17,500 of that was put into her 401(k) as an elective deferral. How much can I put in as a profit sharing contribution? Does it matter how much my business made as a profit for the year or does that only affect how much I can contribute for myself?
Based on the above example and what I think is accurate, I believe that I can only contribute $6,250 (25% of $25,000) as a profit sharing contribution for her. Is this correct?
If the above is correct, then I believe that her compensation needs to be $138,000 before the profit sharing in order to max out her 401(k) [$17,500 + $34,500 (25% of $138,000) = $52,000]. Is that also correct?
Thanks in advance for your help.