I am studying Solo 401K plans for corporations with a single employee and shareholder. The rules allow an employee over 50 to elect to defer $22.5K in 2012. In addition, the rules seem to allow the corporation to do a profit share of 25% against gross wages (W-2 wages not corporation net income). I was putting together a table to show maximum deferrals at different salary levels, and I ran into an interesting case. What if the S-Corporation's sole employee makes $25K gross wages and defers $22.5K. The rules seem to suggest that the employer can still do a profit share of
25% against $25K wages, or $6,250. $22.5K + $6250 = $28,750, which is more than the employee's gross salary.Is such a case possible, or is there some additional limitation so that the deferral plus the profit share can never exceed the gross wage?