Accounting, Payroll & Pension Issues/401k loans

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Question
An employee took a loan from their 401k.  We use a third party to process payroll and repayments are processed through the salary deductions.  Do I need to record the loan on our books?  If so, what would be the entry?

Answer
401k loans are not recorded in accounting. These loans are from the 401k account which is in trust with your 401K provider.

The repayments simply go into the 401K account on your books. It is a deduction from payroll which is a debit and it is a credit when you send it in to the 401K provider to pay the loan payment with your 401K contributions.

So my coding if the payment is 30.00 would be:

21165  401K   credit 30.00  (from payroll check)

21165  401K   debit 30.00   (from 401K payment to trust)

It than is a wash in your system.

Shirley

Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR

Expertise

I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.

Experience

25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.

Organizations
SHRM, APA, I.O.M.A.

Publications
I.O.M.A. and BNA

Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

Awards and Honors
APA Hotline Citation of Merit for last 8 years.

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