Hello,
I've combed through the IRS publications on retirement plans and I can't seem to get a concrete answer.
My client is the sole employee in his Sub-S.
He has a solo 401k through that business.
He has health insurance that he pays for though the business. Those premiums paid are included in his W-2, box 1 wages.
The EMPLOYER match contribution for the solo 401k contribution can be up to 25% of wages. Are the eligible wages, salary wages only, or do they also include the health insurance premiums?
As an example:
Wages are $50,000 for the year, Health Insurance Premiums are $10,000.
Box 1 on the W-2 shows $60,000. Box 3 & 5 show $50,000.
Is the company allowed to contribute $12,500 in ER contribution, or $15,000? Or in other words, is it the Box 1 wages, or box 3/5?
Thanks!