Our LLC is taxed as an S-Corp, and we recently opened an individual 401(k). My question is about the employer contribution (25% of salary).

To make the numbers easy, let’s say the LLC pays me a $48,000 annual salary ($4,000 per month), and I want to make the maximum employer contribution for the year ($12,000).

Does it matter at what point in the year that contribution is made? For instance, provided that the LLC does in fact end up paying me $48,000 by year-end, would it be a problem if all $12,000 had been contributed by the end of September, even though I’d only been paid $36,000 by that point?

My understanding is that the 25% limit is only checked at the end of the year. But I’m not 100% certain on this and don’t want to do anything stupid.

Thanks,
Mike