401(k) deferral election exceeds available compensation (after deductions for payroll taxes, court ordered payments, loan repayments...)

[Guest BL333]

According to an employer's payroll practices (not covered in the plan document), payroll taxes, court ordered payments, loan repayments (etc) are deducted from a participant's paycheck before elective deferrals to the participant's 401(k). Recently, the employer has encountered the situation where there is not enough money in the participant's paycheck (after the above listed deductions) to cover the 401(k) deferral elected by the participant. The plan document states that "the amount which the employee elects or agrees to be contributed to the plan shall be the amount by which the employee's compensation is reduced."

Is there any guidance on what the employer should do here (may the employer skip the deduction altogether (with no opportunity for make-up) or must any available amount be deducted and a corresponding contribution to the 401(k) be made)?

This topic was discussed in the April 2008 thread "401(k) elective deferral hierarchy," but no consensus was reached. Any advice would be greatly appreciated!

Thank you!

[QDROphile]

Advice #1: Amend the plan and complain (or worse) to the person responsible for having plan terms that put the employer in such a predictable predicament.

Advice #2: Have the plan fiduciary interpret the plan to achieve the practical result that only the available amounts after the applicable priority reductions are recognized for deferral. The plan terms give the ficduciary the authoruty to interpret, right?

Advice #3: Don't rely on the advice of strangers.

[Bird]

You can't do what you can't do. I might try to get the person to sign a new form saying no deferrals, or write a note to the participant and keep it on file explaining why no deferrals will be withheld. I don't see any reason for complaining about the document - I'd rather just deal with it on this rare basis than add more words to an already bloated document.