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

These screen shots were generated using QuickBooks 2008. 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 435-7400 or 888-822-5619.

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

You may or may not have Roth401(k) option in your plan.Leave the second boxunchecked if not.

401(k) salary deferrals should bedeposited as soon as possible afterpayroll.

Enter the name of thebroker and accountnumber for yourretirement plan

Verify Payroll Item Set Up

Right-click

Default liabilityaccount is PayrollLiabilities - betterto keep eachtype separate, sochange this to401(k) Payable

401(k)deductions arededucted beforeFederalWithholding iscalculated

You will enter limits at theemployee level, since it isdifferent for those under age50 and those age 50 and over.

Alternatively, you may enterthe under 50 limit here andoverride it for anyemployees over age 50 onthe employee level. Thiswill need to be updatedeach time there is a limitchange by the IRS.

If your plan does not have Roth401(k), skip to page 13

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

Roth 401(k) deductionsare deducted aftercalculating all taxes, sonothing is markedhere.

You will enter limits at theemployee level, since it isdifferent for those under age 50and those age 50 and over.The limit for 2010 for thoseunder age 50 is $16,500 and forthose age 50 and over is$22,000.

Alternatively, you may enterthe under age 50 limit here,and override the limit at theemployee level for anyemployees over age 50. Thiswill need to be updated eachtime there is a limit change bythe IRS.

Keep in mind, the Roth 401(k)limit and the 401(k) limit is acombined $16,500 for 2010,so if you have employees whoare doing both types of 401(k),the limits will need to be$16,500 together.

Your plan document may notrequire funding the matchper pay. If so, and if you donot choose to, you can makethis payroll item inactive.Otherwise, set it up asfollows, and QuickBooks willcalculate the match for youto deposit per payroll.

Change from "PayrollLiabilities" to "401(k) MatchPayable" and from "PayrollExpenses" to "401(k) Match"

Add 401(k) Deduction and Match Contribution to Employee Set Up

You can enter the rateof match and limit here,and just override at theemployee level, if youchoose. For example,the rate of match for asafe harbor plan wouldbe 4% with a limit of$9,800 (for 2010); but ifanyone defers less than5% (for a Basic Match)or 4% (for an EnhancedMatch), the rate ofmatch will have to beadjusted on theemployee level.

Here's where the math comes in. In this example,the employee chose to defer 5% of pay as atraditional 401(k) and 3% of pay as a Roth 401(k).Since the total 402(g) limit is $16,500, I haveprorated it based on 5/8ths and 3/8ths.

The match here is an example of a safe harbormatch of 100% up to 3% and 50% from 3-5%. Ifsomeone defers 5% or over, the match is 4%. Themaximum compensation in a retirement plan for2010 is 245,000, so the match is limited to 4%$245,000, or $9,800.00.

See below for another example.

9,800.00

In this example, the employee has chosen to defera dollar amount per pay, rather than a percentage.In figuring the match for this situation, you have tocalculate an estimated percentage based on thedollar amount deferred and the employee'scompensation.

50.00 x 26 pays = 1,300.001,300/50,000 = 2.6% estimated deferral percentage

Be sure when making this calculation to considerwhether the employee is entering during the middleof the year rather than at the beginning, and also toconsider the maximum compensation level of$245,000 (for 2010).

If this plan also has a safe harbor match asdescribed in the previous example, this employee'smatch will be 100% of his deferral, since he isdeferring less than 3%.

We have not entered a limit here, because theemployee is deferring much less than the safeharbor limit of 4% of pay. However, you could enter4% x $50,000 or $2,000.00.

This calculation becomes more complex when theemployee is hourly rather than salary and hasvarying compensation per pay but the same dollaramount of deferral per pay. This is why werecommend that participants choose a percentagedeferral rather than a dollar deferral. However, ifyou have this situation, please contact the BenefitsTeam and we will be glad to help.

In most cases, the match calculation is "trued up" atyear end, so if the per pay calculations are a littleoff, it is OK.

-16,500.00