My wife runs our large home daycare with one employee and I help out. I am required this year to take a Required Minimum Distribution from my IRA of ~46k. In the past my wife has only contributed the $6,500 to her IRA, but due to my RMD our income will be much higher and we want to increase her pre-tax retirement contributions.
It appears if she did not have any employees she could opt for the Self-Employed 401k. Since she doesn't qualify the SEP IRA seems available, but I'm confused about the contribution to employee(s). Her current employee has only worked here for ~6 months. Can we set up the SEP IRA with the requirement of employee must be working for 3 of the last 5 years, thus eliminating the requirement for employee contribution at this time, but still allow my wife to contribute?
If so can I undue the current $6,500 contribution to her IRA?

Thanks,
Jim

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