Tip income and insufficient paycheck for 125 plan deductions to pay fo

[Guest bshanbrom]

Employees earn tips (paid in cash) and subsequently do not have enough wages to have pre-tax (125 plan) premiums taken out of their paycheck each month. How does employer deal with this? I am looking for IRS regs or rulings please.

[Mike Preston]

I think you should look at the document. It will probably say something to the effect that an employee's election may not exceed a certain threshold. That threshold is likely defined as compensation exclusive of tips. If so, it seems the employee made a bad election and the employer should follow the terms of the document in how to deal with it.

Is your document really silent?