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htb1
Level 1

401k company match setup without a current liability

I've read many posts here but have not found this particular situation.   

Scenario: 1) An employee who is eligible for a 401k company match uses paycheck direct deposit to contribute every pay period to a personal 401k they have had since before employment here.

2)  They wish to have the company match to be part of the direct deposit.

3)  QuickBooks wants to set up a current liability for the new company contribution, but the 'current liability' would be paid with the paycheck and not a company check later.

 

How do I set up a company match addition that will be treated as a 'regular' 401k match but gets paid to the employee's 401k account with the paycheck and not sit in a liability account until the company pays it?

 

Thanks in advance for any advice.

Tom

 

1 Comment 1
john-pero
Community Champion

401k company match setup without a current liability

I would advise you first to discuss this with your plan administrator. My experience with company sponsored 401k is that the funds you match to a deduction are considered trust funds and must be handled in a certain fashion and paid to the plan, not to any employee's outside account.  It could be a violation of the company plan to treat the employee's 401k that is not "in" the company plan as being able to receive tax treatment - or even be eligible for the match.

 

If, after determining from the plan admin, that this outside 401k can be paid into with pre tax dollars then I suggest you deduct the employee portion as prescribed, match it, and then make an electronic deposit to the employee's 401k.

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