Monday, February 25, 2019

Processing 401(k) Credits

401(k) plan providers issue credits to employers for employee forfeitures from the plan. The credit is usually applied only to the Company Contribution portion or the 401(k) employer match.


Please follow the steps below in processing 401(k) credits received from plan providers:


1. Enter the credit through a Payroll Adjustment:


Entering the credit through a payroll adjustment updates the payroll reports and creates the corresponding journal entry at the same time.


- Navigate to Transactions > Employees > Create Payroll Adjustment

- Select employee name on the Payee field

- Select a date on the Pay Period Ending field

- Select a date on the Post Date field – this date is going to be used in reporting the payroll adjustment on payroll reports and posting the G/L impact on the books

- Select any account on the Account field – technically, the payroll adjustment does not affect the balance on the account selected on this field because the adjustments are entered only on the Company Contribution portion; On the other hand, it is suggested by the Field Level help to select the payroll funding account on this field

- Click the Company Contributions tab

- Enter the assigned credit for the employee as negative on the Amount field

- Click Save

- When the new payroll batch is created, the user can review the payroll adjustment by clicking the Paychecks tab > View

- When done with the review, go back to the payroll batch and click Commit


2. Applying the credit to succeeding liabilities from 401(k) employer match:


Processing regular payroll runs calculates liabilities from 401(k) employer match. Apply the existing credits before processing payments to the 401(k) plan provider.


- Navigate to Transactions > Bank > Pay Payroll Liabilities

- Set the start and end dates of the liabilities to be paid on the Show Liabilities From and Through date fields

- Check Apply Existing Payments check box

- Check the Pay box on the assigned 401(k) company contribution payroll item and the credits under the Unapplied Payments column automatically offset with the Amt. Due


Note: If the Unapplied Payments is greater than the Amt. Due, Amt. Paid equals to zero; If the Unapplied Payments is less than the Amt. Due, Amt. Paid equals to the excess of Amt. Due from the Unapplied Payment


- Click Save



1. Steps above are applicable for users with Administrator Access.

2. Users must assign first an amount per employee from the issued credit before creating payroll adjustment.


Related Articles:

1. Creating Payroll Adjustments

2. Making Payroll Liability Payments

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