Self-employed 401(k) Question

[goneboarding]

Before talking to my SE 401(k) plan administrator, I wanted to get some advice from folks who might have dealt with this... or a similar issue.

I am the sole employee of my own my own S Corp. Though DW has been assisting with the business, we've had a single 401(k) contributor account in my name. Single W-2, filing jointly. This is current state.

Now, because of the ACA plan choices in my neck o' the woods, I've been advised to get DW officially on the payroll so that we will be eligible to shop (more choices and better quality) group plans for 2018.

So for 2017, DW and I will have separate W-2s. Will this have any impact on the current SE 401(k) configuration? Will we be required to create a separate 401(k) employee account for DW?

Thanks,

 

[DawgMan]

Not sure I fully understand the question(s), but I will give you my relevant experience. I am a self-employed 1099 guy and have had my wife on the payroll as a W2 employee and 1099 employee. 10+ years ago I switched from my personal SEP plan to a Defined Benefit Plan which has been very lucrative. The DB plan is ideal for high earners who can commit serious $$ to the plan year after year. While it uses actuary formulas and takes into account previous years incomes, you can put away multiple $100k's per year... yes multiple that are deducted off your income every year just like your current tax differed contributions. I'm simplifying it and you need to discuss with an educated accountant, but it was the best tax saving strategy I was able to use. As it relates to ACA, I have yet to find any configuration (income too high) that saves me $$. Good luck!

 

[pb4uski]

....Now, because of the ACA plan choices in my neck o' the woods, I've been advised to get DW officially on the payroll so that we will be eligible to shop (more choices and better quality) group plans for 2018. ...

I don't get this. For a couple years my LLC sponsored our health insurance... we had a small group plan... in our case a group of one (me)... and I elected to include spousal coverage (but she was not an employee).

Just like employer coverage can cover the employee and the spouse even though the spouse is not on payroll.

 

[MichaelB]

I've been advised to get DW officially on the payroll so that we will be eligible to shop (more choices and better quality) group plans for 2018.

I would ask this advice-giver for specific examples of health care policies for a group of two that are better quality and not available for individuals. Before making this type of change, you should validate that the changes in health care coverage are worth the effort and cost of making changes to your business structure.

I don't get this. For a couple years my LLC sponsored our health insurance... we had a small group plan... in our case a group of one (me)... and I elected to include spousal coverage (but she was not an employee).

Just like employer coverage can cover the employee and the spouse even though the spouse is not on payroll.

Some states have separate regulations for small business health insurance eligibility and offerings, and define the small business as groups of at least 2 or 3 employees. The OP profile says he lives in Texas. According to the Texas Dept of Insurance Small Employer Health Insurance

Texas insurance law defines a small employer as a business with two to 50 employees, regardless of how many hours they work.

This is similar to Florida. Prior to the ACA, business of one employee had guaranteed issue, but the insurance policy offerings were very limited.

 

[goneboarding]

I don't get this. For a couple years my LLC sponsored our health insurance... we had a small group plan... in our case a group of one (me)... and I elected to include spousal coverage (but she was not an employee).

Just like employer coverage can cover the employee and the spouse even though the spouse is not on payroll.

This may be my fall back position... my health insurance broker mentioned that only one provider who underwrites in my area may consider a small group plan like you described. Others require some proof (payroll stubs) of at least one other employee for us to be eligible for group plans. Not sure if this makes any difference, but I am operating under an S Corp, as opposed to a pass-through LLC.

EDIT: Also what MichaelB said.