Compensation insufficient to make deferral

[Guest griffith]

We have a participant who has elected to defer a flat dollar amount. This payroll his compensation is not sufficient to withhold the full flat dollar amount due to garnishments from his pay. How do we handle this? Do we make up the difference on some future payroll?

[Jim Chad]

The only way I have ever heard of this being handled is to ignore his 401(k) deferral for any pay there is not enough to do the full amount.

Has anyone else heard of anything else?

[Mike Preston]

Unless the deferral authorization form specifically addressed this issue, I would be hard-pressed to understand how it could be interpreted to allow for a make-up. It would seem to violate the reasonable expectations of most employees.

[BG5150]

Just curious as to why someone would want to still put money in a 401(k) if the rest of the paycheck is being garnished.

[Guest griffith]

Since the participant made the election based on pay from that payroll period, I too would think it would be unjust to withhold from a future payroll. If the participant had remembered to change his election prior to the payroll period, we could have avoided this issue. I think we'll modify the election form to address this issue so there won't be any questions in the future. Your input is greatly appreciated.