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Paycheck Wizard: Allow for 401K contributions to be categorized instead of transferred to 401K acct

Boatnmaniac

In Paycheck Wizard, 401K contributions are set up for transfer into the 401K account adding to the 401K account cash balance. But some 401K plans do not allow for cash to be held in the account. In these type of 401K accounts, the cash transferred by the employer for the employee contribution and the employer matching contribution go directly toward the purchase of securities and never goes into the 401K cash balance. This results in BoughtX transactions being downloaded which does not decrement the account cash balance which results in overstating the total value of the account and requires manually changing BoughtX transactions to Bought transactions which can be very time consuming to do.

If Employee Contributions and Employer Matching Contributions could be optionally categorized as _401Contrib (or _401ContribSpouse) and as _401EmployerContrib (or _401EmployerContribSpouse) instead of transfers to the 401K account it would eliminate this issue in this type of 401K account. And it would still allow for the data to be properly captured in Tax reports and Tax Planner.

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ddo71

I have this same problem. I set up a paycheck wizard and it shows the contribution and the employer match in cash. The download from the 401k site shows to the penny that money invested in a variety of vehicles. It all checks out and I want to delete the cash but it won't let me. I would associate the check with the securities purchase on the same day, but I can't really make it a memorized investment because the number of each security purchased will change check to check and there isn't a one to one tie between the source of funds and the investment. I can't delete the cash because it says I have to delete the removal from the paycheck, which then screws that up. I can't associate the cash with the purchase which would be ideal, but open to any idea. Help, please.

Chris_QPW

@ddo71 be sure to select the vote button above if you haven't already.

The workaround is to delete the 401K entry in the paycheck reminder, and then select "Add Pre-Tax Deduction" -> Other Pre-Tax Deduction. In that dialog you can use a category instead of a transfer to the 401K account. Use the appropriate category from the ones above in the original posted suggestion. Note if you have an employer contribution you will have to do this twice.

ddo71

@Chris_QPW

Thank you, very helpful. I did this and it allowed the 401k balance to reconcile. One question though is that I didn't fully understand the part about doing it twice for the employer match. The new securities show up as bought securities the next trading day. So, let's say I contribute $1000 and there's a 50% match, and I invest in 5 securities equally, there's $300 in each of them when it syncs. Am I missing something? I'm trying to really use this for tax planning and investment tracking more than budgeting.

Boatnmaniac

@ddo71 - When setting up a Paycheck Reminder there is the option to enter an amount for the employer match. If you entered an amount there then it, too, will enter a cash deposit amount into the 401K. I'm pretty sure that deposit is what @Chris_QPW was referring to that would also need to be addressed in both the 401K register (to remove that cash) and in the Paycheck Reminder so it doesn't continue to deposit that cash into the account.

If you didn't set up your Paycheck Reminder to include the employer match contribution, then you don't need to do anything because Quicken will not deposit that cash into your 401K account.

I personally did not find much value in including employer match contributions in Paycheck Reminders because it really doesn't impact anything that I wanted to track in Quicken. I was always more interested in seeing how much my 401K value changed, the investments performance and my 401K contributions (for tax reports and Tax Planner). The employer match really doesn't play into that too much but some people like to track all aspects of compensation, including those which are outside of the normal W2 pre-tax and after-tax income and expense categories that affect affect tax liability.

BTW, as @Chris_QPW suggested, if you haven't clicked on the vote button above, please do so. The more people who vote for an idea, the more likely the Quicken team will put it into their development plans.

Chris_QPW

@ddo71 @Boatnmaniac is spot on with his explanation.

Entering the employer contribution is much more important when the 401K account isn't setup so that it gets BuyX/SellX, and instead gets Buy/Sell. In that case it is getting the cash for the buy from the cash balance of the 401K account, and you need the entry in the paycheck reminder to get that transfer or else you won't have enough cash in the register.

For the case where you don't want/need a transfer to the 401K it is pretty optional to put in the employer contribution. And since the employer contribution isn't taxable the only place I have ever seen it show up for "reporting" is in the "Income Year-to-Date widget on the Home tab.

Note that the entry for your contribution on the other hand is very important because it is used to reduce your taxable income (below _401ContribSpouse is negative, and _401EmployerContribSpouse is positive).

Image: https://us.v-cdn.net/6031128/uploads/editor/t0/cpgq3khn4qak.png

Chris_QPW

And now that I have walked through this, I realized that my suggestion about the employer contribution is wrong!

If you enter it as a Pret-Tax Deduction it will reduce the amount of your paycheck which won't work!

And besides it will have the wrong sign.

So don't put in employer contribution.

UKR

Quicken already does what you're suggesting. No changes needed, but ...

Retirement contributions are transferred to the retirement account (IRA, 401k, etc.)

To properly mark these transfers as contributions, Quicken categorizes these transfers to appropriate tax line items under the covers if and when the Tax Schedule options (in Edit Account Details for the retirement account) have been set and both Transfers In and Transfers Out specify the correct tax line items.

Boatnmaniac

UKR said:

Quicken already does what you're suggesting. No changes needed, but ...
Retirement contributions are transferred to the retirement account (IRA, 401k, etc.)
To properly mark these transfers as contributions, Quicken categorizes these transfers to appropriate tax line items under the covers if and when the Tax Schedule options (in Edit Account Details for the retirement account) have been set and both Transfers In and Transfers Out specify the correct tax line items.

The issue is that some 401K plans do not allow for cash to be held in the account. Buy transactions downloaded by the FI for these types of plans are BoughtX because security shares are bought with cash transferred in from the employer but not actually deposited into the 401K account at the FI. BoughtX transactions do not decrement the cash Quicken transfers into the account via the current Paycheck Reminder 401K contribution options (i.e., transfers from the paycheck to the 401K account). Currently, this then requires every single BoughtX transaction to be manually changed from BoughtX to Bought so the cash in the account in Quicken is decremented.

By adding the categories listed in this proposal as options for handling employee contributions and employer match contributions for this kind of 401K plan, the cash will not be transferred into the 401K account in Quicken and the need to manually edit every BoughtX transaction that is downloaded is eliminated while still properly categorizing the paycheck transactions for paycheck deposit and tax calculations.

Boatnmaniac

Chris_QPW said:

And now that I have walked through this, I realized that my suggestion about the employer contribution is wrong!

If you enter it as a Pret-Tax Deduction it will reduce the amount of your paycheck which won't work!

And besides it will have the wrong sign.

So don't put in employer contribution.

Good catch.

ddo71

> @Boatnmaniac said:
> (Quote)
> Good catch.

Thank you both. I created a category for the contribution and then for tax purposes called it an IRA contribution so I can track if against the 401k maximum (Even though the employer should do this, I switched jobs this year so a double check helps.)

Paycheck reconciles as does the 401.

Boatnmaniac

ddo71 said:

> @Boatnmaniac said:
> (Quote)
> Good catch.

Thank you both. I created a category for the contribution and then for tax purposes called it an IRA contribution so I can track if against the 401k maximum (Even though the employer should do this, I switched jobs this year so a double check helps.)

Paycheck reconciles as does the 401.

I'm glad the Paycheck and 401k are reconciling. Creating new categories works for many things but for the Tax Reports and Tax Planner you need to assign the appropriate tax form to it or Quicken will not capture it. You can assign tax forms to a category by editing that category. But you can save yourself that effort by using the appropriate default category which already have the tax form assignments as noted in the 2nd paragraph in the original post above.