Adding a Spouse to Your Solo 401(k)

A Solo 401(k) accommodates the owner and the owner's spouse without losing its streamlined status. For two-spouse businesses where both work in the enterprise, the household's combined retirement contribution capacity can reach $140,000 — or more once catch-ups apply.

The mechanics

The Solo 401(k) plan document must specifically list both spouses as eligible. Each spouse:

• Makes an employee elective deferral up to $23,500 (2025)
• Receives an employer profit-sharing contribution computed from that spouse's own W-2 wages (for an S-Corp) or net SE earnings (for a sole prop or partnership)
• Has a separate §415(c) $70,000 annual additions cap

The two §415(c) caps are independent — the household's combined cap is $140,000 plus catch-ups.

The compensation requirement

A spouse who is paid no W-2 wages and reports no self-employment income cannot contribute to a Solo 401(k). The "spouse" provision is not the same as the spousal IRA — there is no compensation transfer from the other spouse. The spouse must be a bona fide employee or partner with real compensation, performing real work for the business. Inflated wages to a spouse who does not actually work are subject to IRS recharacterization and FICA recapture.

Worked example: maximum two-spouse contribution

A married couple operates a consulting LLC taxed as an S-Corp. Spouse A is the principal consultant; Spouse B handles operations and bookkeeping. The S-Corp pays:

• Spouse A W-2 wage: $200,000
• Spouse B W-2 wage: $100,000 (genuine, for real services)

Solo 401(k) contributions (both under age 50):

• Spouse A deferral: $23,500; profit-sharing: 25% × $200,000 = $50,000 (capped, with deferral, at $70,000 → profit-sharing = $46,500). Spouse A total: $70,000
• Spouse B deferral: $23,500; profit-sharing: 25% × $100,000 = $25,000. Spouse B total: $48,500
• Combined household: $118,500 for 2025

With both spouses age 60–63, the combined total climbs to about $141,000 once super catch-ups are layered in.

Spouse as W-2 vs. partner

If the business is a partnership rather than an S-Corp, each spouse contributes based on their share of partnership self-employment income (Schedule K-1, Box 14, Code A). For an LLC taxed as a partnership with two spouses as members, the §401(c) calculation runs separately for each spouse on each spouse's allocated SE income.

Plan document amendments

Many Solo 401(k) prototype documents default to "owner only" participation. To add a spouse:

1. Confirm the plan document allows multiple participants (most do, but some explicitly limit to one).
2. Provide the spouse with a participant enrollment form.
3. Establish a separate sub-account for the spouse with the custodian.
4. Run payroll properly so each spouse's W-2 and FICA are clean.

The plan does not become subject to ERISA Title I (which would require Form 5500, fidelity bond, etc.) by adding a spouse — both owners and their spouses are excluded from the "employee" definition under DOL Reg. §2510.3-3(c).

Common mistakes

• Paying the spouse without W-2 wages. A distribution from the business is not compensation for retirement-plan purposes. Run actual payroll.
• Inflating the spouse's wage to maximize the contribution. Reasonable compensation rules apply to both spouses, and a wage materially above market for the spouse's actual services can be recharacterized as a distribution to the principal owner.
• Forgetting the spouse counts toward the 5500-EZ asset threshold. The $250,000 trigger is plan-wide, not per-participant. Two spouses with $150,000 each cross the threshold.
• Treating spousal participation as automatic. Some plan custodians require explicit enrollment paperwork; without it, the spouse's contributions are not recognized.

Sources

• Internal Revenue Code §401(c), self-employed retirement plan participation (Cornell LII): law.cornell.edu/uscode/text/26/401
• Department of Labor Regulation §2510.3-3(c), exclusion of owners and spouses from ERISA "employee" definition: law.cornell.edu/cfr/text/29/2510.3-3
• Internal Revenue Code §415(c), per-participant annual additions limit: law.cornell.edu/uscode/text/26/415
• IRS Publication 560, Retirement Plans for Small Business: irs.gov/forms-pubs/about-publication-560
• IRS, "One-Participant 401(k) Plans": irs.gov/retirement-plans/one-participant-401k-plans

RetirementCheck101's worksheet (step 8) checks spousal participation eligibility automatically. Explore the free educational tool.