Pay less than the 401(k) withholding election.

[Just Tri]

Participant elects flat dollar amount to be withheld from paycheck.  Pay amount for this pay period is less than the election amount.  Should the election be ignored or 100% less tax withholding be withheld?  The document, deferral procedure and enrollment form are all silent on the issue.

Thanks for any guidance.

[Mike Preston]

100%. With that said, this is a disaster waiting to happen.  Why wait for the IRS to come in and say the election itself is flawed? It should include language as to what happens if the election amount exceeds comp.

[JackS]

Ask the participant

[Larry Starr]

19 hours ago, Just Tri said:

Participant elects flat dollar amount to be withheld from paycheck.  Pay amount for this pay period is less than the election amount.  Should the election be ignored or 100% less tax withholding be withheld?  The document, deferral procedure and enrollment form are all silent on the issue.

Thanks for any guidance.

The employer obviously withholds the flat dollar amount UP TO the amount available in the paycheck. While it might be useful to have such language dealing with this situation in the election form (which would say exactly the same thing I said in the first sentence of this response), I think it is a given and no other option is possible.  Asking the employee is probably not practical as no one is watching that the payroll will be less than the election and there likely is not enough time to get a new election signed that changes the amount, and I (as the employer) wouldn't bother asking.  Take all that we can up to the limit, and then on to the next payroll period.