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How do I set up the 401k Company Match?

Our 401k company match is calculated as 60% of the employee's 401k withholding amount up to 7% of the employee's gross wages.  For example:  if the employee withholds 5% the company would match 60% of that, or 3% of the employee's gross wages.  The most the company would match is 4.2% of the employee's gross wages (7% x 60%).  My question is, how is that calculation entered into the Payroll Item setup for 401k Company Match?

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Best answer 12-10-2018

Accepted Solutions
QuickBooks Team

Hi Bonnie, You just need to leave the rate on the payroll...

Hi Bonnie,

You just need to leave the rate on the payroll setup blank, since not all employees might have the same amounts. You just have to enter the rate for both 401(k) the employee and the company match.

Here's how:

  1. Click on the Employees menu.
  2. Double click on the employee name.
  3. Go to the Payroll Info tab.
  4. In the ADDITIONS, DEDUCTIONS AND COMPANY CONTRIBUTIONS section, add the 401(k) payroll 
  5. Insert the specific rate for this employee.
  6. Click OK, and repeat this for the rest of the employees.

I hope this helps you today.

14 Comments
Not applicable

Company will match the first 3% and half match between 3%...

Company will match the first 3% and half match between 3% and 5%
Established Community Backer ***

@agopianinsurance Your comment here means you need Two Pa...

@agopianinsurance
Your comment here means you need Two Payroll Items; one for the 3% max, and the additional for those who participate to the Next Tier.
Not applicable

QBteachmt - how do you do the next tier since quickbooks...

QBteachmt - how do you do the next tier since quickbooks doesn't allow the statement 50% up to 5%
Established Community Backer ***

"how do you do the next tier since quickbooks doesn't all...

"how do you do the next tier since quickbooks doesn't allow the statement 50% up to 5%"
You "do the math" as one item, putting the specific Rate for that employee; or as two items, because you want to leave your Base Item always as is.

Example:
Employee deduction item 5%
Payroll item Company Contribution match 3%
Payroll Item Company Contribution Additional Match 1% <== Half of the additional amount the employee is contributing that is over the 3%

Now employee = 5% (3 + 2) and employer = 4% (3 + 1).

Or,
Employee deduction 5%
Employer Match 4%

Do the math as a ratio "employee:employer:"
4:3.5 (3+1 to 3+.5)
5:4 (5+2 to 3+1)
6:4.5 (3+3 to 3+1.5)

Or,
Employee deduction 3%
Employer Match 3%
and this person is not participating above the first match
QuickBooks Team

Hi Bonnie, You just need to leave the rate on the payroll...

Hi Bonnie,

You just need to leave the rate on the payroll setup blank, since not all employees might have the same amounts. You just have to enter the rate for both 401(k) the employee and the company match.

Here's how:

  1. Click on the Employees menu.
  2. Double click on the employee name.
  3. Go to the Payroll Info tab.
  4. In the ADDITIONS, DEDUCTIONS AND COMPANY CONTRIBUTIONS section, add the 401(k) payroll 
  5. Insert the specific rate for this employee.
  6. Click OK, and repeat this for the rest of the employees.

I hope this helps you today.

Not applicable

Re: Hi Bonnie, You just need to leave the rate on the payroll...

Employee is paid hourly and makes a dollar election (i.e $50 per pay).  Sometimes that amount is less than 3% of total compensation and they get a full dollar for dollar match.  Sometimes it is more than 5% of pay and the get a 4% match.  Sometimes, it's between 3 and 5% of pay and the match must be calculated, it cannot be overridden or "plugged" as a static %.  Can QuickBooks actually do the match to calculate the match in this case? 

 

For example, here is an excel formula for calculating a basic safe harbor match (100% of deferrals up to 3% of comp plus 50% of deferrals >3% but <5% of comp).  This is one of the most common formulas used by 401k plans using a Safe Harbor matching provision.

 
 

=IF(L12/J12<0.03,ROUND(+L12,2),IF(+L12/J12>0.05,ROUND(+J12*0.04,2),(ROUND(+L12-(+J12*0.03),2)*0.5)+ROUND(+J12*0.03,2)))

Where J is the sum of the participants salary deferrals (pre-tax plus roth plus all catch up contributions) and L is the participants plan compensation.  "Plan Compensation" also must be defined as it may be gross or it may (commonly) exclude things list fringe benefits, bonuses, overtime etc.  Most modern payroll systems can handle this but they can be very confusing to set up for people who do not use them professionally.  if it can handle this calculation, is there a tutorial or QuickBooks support to help the payroll person set this up properly in QuickBooks?

Not applicable

Strike that....reverse it

L is salary deferrals, J is comp....my bad.

QuickBooks Team

Re: Strike that....reverse it

Hi there, @JSerra.

 

Thank you for joining this thread and providing some details. Allow me to share some insights about the payroll settings in QuickBooks.

 

Currently, the ability to get the employee's pay based on the percentage (%) of total compensation is not available. The workaround available is to use the Excel formula and once you get the value, you enter them on the employee paycheck.

 

I can see how this feature would be helpful for you and your business. I encourage you to submit a feedback to our Product Development Team for review when determining features to be added in updates. I'm going to submit feedback from my side as well.

  1. Click the Help menu bar.
  2. Scroll down to Send Feedback Online.
  3. Select Product Suggestion.
  4. Choose Product Suggestion for the Type of Feedback.
  5. Product Area is optional.
  6. Enter your suggestion.
  7. Click Send Feedback.

Please know that the Community is a one stop shop for help about QuickBooks. You can post anytime if you have other payroll questions or want to share your best practices using the product.

Not applicable

Re: How do I set up the 401k Company Match?

My company makes one-time 401k Safe Harbor matching contributions after the end of the fiscal year. I don't see a way in Quickbooks Payroll to set-up this type of one-time matching contribution. Last year I did it outside of Payroll but then it becomes difficult to report the contributions as part of an employee's total compensation package and there is not a single 401k contribution report I can go to as part of my required 401k audit reporting and testing. Anyone figured out how to do this inside payroll?

Established Community Backer ***

Re: How do I set up the 401k Company Match?

"Anyone figured out how to do this inside payroll?"

 

You need to have the Company Contribution Item set up as retirement, assigned for the Tax Tracking type that meets your needs, and in use on the Paycheck Details. Employer-only amounts are not seen on the W2 or 941/944. It should show as Exempt on 940.

Not applicable

Re: How do I set up the 401k Company Match?

I've gone into Payroll, set up a new Company Contribution, assigned it to "Retirement Plans." Quickbooks asks me to specify a type of retirement plan in a drop down. The only option that makes sense to me is "401k." Then the only option for "Company Contribution" is "Amount per pay period." I need to make a one-time payment, not a recurring one. Where am I going wrong?

QuickBooks Team

Re: How do I set up the 401k Company Match?

I've got your back, FrankBarnard.

 

I can help you complete the set up of your Retirement Plan contribution.

 

I'm happy to tell you that you're actually on the right track. That said, since you only need to make a one-time payment, you can simply enter a zero (0.00) amount in the Amount per pay period field to complete the setup.

 

After that, allow me to walk you through the steps on how to use this on your next payroll run:

  1. Select Workers in the left navigation menu.
  2. Click the Run payroll button.
  3. Choose the correct pay schedule, then hit Continue.
  4. Check the employee, then click the edit (pencil) icon. If the employee is paid hourly, then enter the number of hours first.
  5. Expand the Company-paid contributions drop-down, then hit OK.
  6. Click Review Payroll, then Submit Payroll.
  7. Hit Finish Payroll.

 

That should do it. With these resources, I'm confident you'll be able to make the payment like a pro in no time!

 

I hope this response finds you with a smile today. Let me know if there's anything else I can do for you, I want to make sure you're taken care of. Thanks for reaching out, wishing you and your business the best.

Not applicable

Re: Hi Bonnie, You just need to leave the rate on the payroll...

Related Question: Under the employee additions/subtractions There is a box that can be checked: employee is covered by a qualified pension plan. If we are starting a 401K plan do I check this box for all eligible employees or is this something else altogether. 

QuickBooks Team

Re: Hi Bonnie, You just need to leave the rate on the payroll...

Yes, you'll need to check the tick box, @sandybeach.

 

Let me share some information on how the Qualified Pension Plan tick box affects your 401k plan.

 

When you place a checkmark in the Employee is covered by a qualified pension plan box in the Payroll and Compensation Info tab of the Edit Employee window, QuickBooks places a checkmark in the Retirement Plan checkbox of Box 13 on the Form W-2. The IRS uses this box to determine if special limits apply to the amount of traditional IRA contributions that an employee may deduct on the Form 1040.

 

You can read through this IRS page for more insights: Are You Covered by an Employer's Retirement Plan?

 

Also, I'd recommend contacting your pension plan administrator to verify whether the employee is eligible to participate in a plan.

 

Feel free to click the Reply button if you have other questions. I'm always here to help.

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