401(k) Plan Payroll Items Set Up Instructions for QuickBooks

Transcription

1 401(k) Plan Payroll Items Set Up Instructions for QuickBooks These screen shots were generated using QuickBooks If you have a different version, your choices may be slightly different. If you have any questions, please feel free to call a Benefits Team Member at or How do I Set up payroll items for my 401(k) Plan? Ensure the payroll items are coded to the correct accounts in my general ledger? Set up an employee to have a 401(k) deduction and company match? Payroll Item Set Up

2

3 You may or may not have Roth 401(k) option in your plan. Leave the second box unchecked if not.

4 Enter the name of the broker and account number for your retirement plan 401(k) salary deferrals should be deposited as soon as possible after payroll.

5 Verify Payroll Item Set Up Right-click

6 Default liability account is Payroll Liabilities - better to keep each type separate, so change this to 401(k) Payable

7 401(k) deductions are deducted before Federal Withholding is calculated

8 You will enter limits at the employee level, since it is different for those under age 50 and those age 50 and over. Alternatively, you may enter the under 50 limit here and override it for any employees over age 50 on the employee level. This will need to be updated each time there is a limit change by the IRS.

9 If your plan does not have Roth 401(k), skip to page 13

10 Again, change this from "Payroll Liabilities" to "Roth 401(k) Payable"

11 Roth 401(k) deductions are deducted after calculating all taxes, so nothing is marked here.

12 You will enter limits at the employee level, since it is different for those under age 50 and those age 50 and over. The limit for 2010 for those under age 50 is $16,500 and for those age 50 and over is $22,000. Alternatively, you may enter the under age 50 limit here, and override the limit at the employee level for any employees over age 50. This will need to be updated each time there is a limit change by the IRS. Keep in mind, the Roth 401(k) limit and the 401(k) limit is a combined $16,500 for 2010, so if you have employees who are doing both types of 401(k), the limits will need to be $16,500 together.

13 Your plan document may not require funding the match per pay. If so, and if you do not choose to, you can make this payroll item inactive. Otherwise, set it up as follows, and QuickBooks will calculate the match for you to deposit per payroll.

14 Change from "Payroll Liabilities" to "401(k) Match Payable" and from "Payroll Expenses" to "401(k) Match"

15

16 Add 401(k) Deduction and Match Contribution to Employee Set Up You can enter the rate of match and limit here, and just override at the employee level, if you choose. For example, the rate of match for a safe harbor plan would be 4% with a limit of $9,800 (for 2010); but if anyone defers less than 5% (for a Basic Match) or 4% (for an Enhanced Match), the rate of match will have to be adjusted on the employee level.

17

18 Here's where the math comes in. In this example, the employee chose to defer 5% of pay as a traditional 401(k) and 3% of pay as a Roth 401(k). Since the total 402(g) limit is $16,500, I have prorated it based on 5/8ths and 3/8ths. 9, The match here is an example of a safe harbor match of 100% up to 3% and 50% from 3-5%. If someone defers 5% or over, the match is 4%. The maximum compensation in a retirement plan for 2010 is 245,000, so the match is limited to 4% $245,000, or $9, See below for another example.

19 In this example, the employee has chosen to defer a dollar amount per pay, rather than a percentage. In figuring the match for this situation, you have to calculate an estimated percentage based on the dollar amount deferred and the employee's compensation x 26 pays = 1, ,300/50,000 = 2.6% estimated deferral percentage Be sure when making this calculation to consider whether the employee is entering during the middle of the year rather than at the beginning, and also to consider the maximum compensation level of $245,000 (for 2010). If this plan also has a safe harbor match as described in the previous example, this employee's match will be 100% of his deferral, since he is deferring less than 3%. -16, We have not entered a limit here, because the employee is deferring much less than the safe harbor limit of 4% of pay. However, you could enter 4% x $50,000 or $2, This calculation becomes more complex when the employee is hourly rather than salary and has varying compensation per pay but the same dollar amount of deferral per pay. This is why we recommend that participants choose a percentage deferral rather than a dollar deferral. However, if you have this situation, please contact the Benefits Team and we will be glad to help. In most cases, the match calculation is "trued up" at year end, so if the per pay calculations are a little off, it is OK.