Expert: Ed McFarland - 10/16/2006

Question
Ed,
My company has a 401K plan in place that only allows for employee 401K contributions.  We are currently not doing any sort of match.  I was wondering what my jouranl entry would be.  The contributions are withdrawn automatically from our checking account, so therefore the first half of the entry would be a credit to the bank, but I am confused as the where the debit should go.  Is it an expense under the COA called 401K contributions?  Please advise

Answer
I would be treating it the same way you treat the employee's contribution to something like FICA or Medicare taxes. It comes right of your paycheck and should be going right to the Plan Administrator.

Gone are the days you could hold the contribution until the end of the month, up to 15 days later, current rules require it to be sent within a couple of days after the pay period.

Good luck