Like many business owners, Jack put his spouse on the payroll during COVID—and she’s still there.
“It started as an emergency measure,” he explained, “but I don’t think I could have grown the business this way without her. But we’re on the same payroll. How does this affect our retirement plan? I probably should have asked you this back in 2020 but…”
“I understand,” I explained. “You never expected this to be a long-term arrangement … but this happens more often than you’d think; I’ve helped many business owners whose spouses have taken on bigger roles in the company and been put on the payroll.”
“So how does it work?”
“Well Jack, there are a few caveats. Increased contribution deductions depend on how much your spouse will be earning and, and on how having them on payroll will affect the contributions of the rest of your employees. But with a well-designed plan, having your spouse on payroll could actually double the contribution deductions you will be able to put into your plan.”
“Double sounds good,” said Jack. “How do we set this up?”
Set up a time and we’ll look into the details. A carefully-designed plan will provide the largest possible deductions for both of you.