100% deferral leads to $0 paycheck

[WCC]

Hello,

Participant elects to defer 100% of pay (after payroll taxes, etc.) this leads to $0 in pay. Participant will not exceed 402g as this election will apply only to a few pay periods.

Question: I always assumed that you can do this with no issues (plan doc does not have a restriction on deferral %). However, the argument is, can you "pay" someone $0 in a paycheck - I still say yes, as they chose to defer it. Under the Wage Act (of the state in question) section "Deductions from wages" says: "Deductions below the minimum wage applicable under FLSA are not authorized". Based on this, I am being told a participant must be paid the minimum wage in their check. I have never heard this before. Is this accurate? Or is this section of the wage act being taken out of context? Do 401k rules override any state wage act?

Thank you

[BG5150]

So, what if your wages are at the minimum level? Your paycheck will be below that.

If I make $6/hr, I may net $5 after taxes.

[Flyboyjohn]

Minimum wage applies to the gross pay before elective deferrals (and payroll taxes), not after

[masteff]

See "voluntary wage assignment" here: http://www.twc.state.tx.us/news/efte/allowable_deductions.html

[WCC]

See "voluntary wage assignment" here: http://www.twc.state.tx.us/news/efte/allowable_deductions.html

exactly what I needed. thank you all

[GBurns]

Note the state law requirement that it has to be authorized in writing.

[masteff]

Oh, and review the results in the payroll system to make sure you're happy with how it handles it if the employee has any other payroll deductions. For example, if it takes the deferral and doesn't take, for example, pre-tax medical then you have a potential problem for your 125 plan.

More sophisticated payroll software let's the user define their deduction hierarchy. It can get complicated deciding how to rank the multitude of deductions they end up w/ in larger corporations.