salary deferral on tips

[cpc0506]

I have a client who is a restaurant.

Employees make minimal wages, Most of the money comes from tips.

How can a employee make salary deferral contribution on the tips they receive? Is this allowable? The definition of compensation in the document is w-2 wages.

Thanks

[PensionPro]

Here is a prior discussion.

http://benefitslink.com/boards/index.php?showtopic=32621

[cpc0506]

Here is a prior discussion.

http://benefitslink.com/boards/index.php?showtopic=32621

I am not sure that this thread helped.

The client has employees who may want to make salary deferral but there is not enough money after fica and state taxes to make a contribution. They want to use their tips to make the contribution.

How is this accomplished?

[rcline46]

Deferrals are a Cash OR Deferred Arrangement - CODA. So we start with the fundamental principals - you have a choice of either cash or deferral.

Now, if they get their tips in cash they cannot defer from the tips. THat is what the thread is telling you.

If all tips are pooled and then distributed (rare but it happens) then the employer could take the deferral before the employee's portion of the pool is distributed to them.