How Do I Best Account For "Cash Source" With 401k Stock Contributions?

crispybishop

My employer's quarterly match is in the form of shares of the company. They deposit the shares to my 401k, and then my auto-rebalance sells those shares and uses the cash proceeds to purchase the relevant mutual fund shares. I presume the "cash source" for the initial company shares is "employer matching contribution", but when I sell those shares and use the resulting cash to buy into the mutual funds I'm elected, are those 2 transactions ALSO "employer matching contribution"?

I'm not sure how big of a role this even plays, but I'm a sucker for completionism.

Frankx

Hi @crispybishop,

There's nothing wrong with wanting to get all the details and get them right - that's just being accurate.

You said "I presume the "cash source" for the initial company shares is "employer matching contribution" - this is correct, the contribution by your employer should be treated as a "matching contribution" when they actually match your contributions, or as an "Employer Profit-Sharing contribution" if it is an employer payment that is not a matching payment.

You also asked "when I sell those shares and use the resulting cash to buy into the mutual funds I'm elected, are those 2 transactions ALSO "employer matching contribution"?  The answer here is "no".  The sale and reinvestment of funds already in the account (i.e. not new contributions from you or your employer) are not new sources in the account - rather they simply are taking the contributions which already have been "sourced" and placing them into different investments.

Let me know if you have any followups.

Frankx

Boatnmaniac

Does your 401K plan investment company allow for downloads into Quicken?  If so, why not just download the transactions from there and be done with it?  Those downloaded transactions should be set up correctly to properly account for everything.

If they don't allow for download into Quicken or if you want to manually enter the transactions: 

• Enter a sell transaction (of your employer's stock) with the cash proceeds directed to your 401k account cash balance. 
  
• Then enter buy transactions for your mutual funds and use your account cash balance to pay for them.
  

Frankx

Hi @crispybishop,

There's nothing wrong with wanting to get all the details and get them right - that's just being accurate.

You said "I presume the "cash source" for the initial company shares is "employer matching contribution" - this is correct, the contribution by your employer should be treated as a "matching contribution" when they actually match your contributions, or as an "Employer Profit-Sharing contribution" if it is an employer payment that is not a matching payment.

You also asked "when I sell those shares and use the resulting cash to buy into the mutual funds I'm elected, are those 2 transactions ALSO "employer matching contribution"?  The answer here is "no".  The sale and reinvestment of funds already in the account (i.e. not new contributions from you or your employer) are not new sources in the account - rather they simply are taking the contributions which already have been "sourced" and placing them into different investments.

Let me know if you have any followups.

Frankx

NotACPA

The problem with "Employer Matching Contribution" ... is that Q expects a dollar value in the paycheck transaction.  So how would you value those shares?

AND, since EMC to a 401k plan isn't taxable income ... I'd just record "Shares Added" followed by Shares Sold followed by MF Bought.

If/When your employer provides the value of those "shares contributed" than you can go back and edit the "Shares Added" contribution to provide a Cost basis for the, presumably brief holding of the stock.

crispybishop

@Frankx, thank you SO MUCH for your help! So is it best to leave the cash source to for those subsequent trades as just "unknown source"? All other options include the word "Contribution" of some element, so I presume unknown is the most relevant, yes?

Frankx

Hi again @crispybishop,

That is correct - the cash source is meant to be used only for funds coming into the account.  For all other activity you really shouldn't need to use that feature.

Frankx

crispybishop

That makes perfect sense. Thanks again @Frankx

Frankx

Happy to help!

Take care.

Frankx

Jim_Harman

FWIW, T Rowe Price continues to track the cash source of investments in its downloads when there are fees, reinvested dividends or exchanges of one fund for another.

For example, when I recently sold one fund and bought another, TRP downloaded 7 Sold transactions, 4 with Employer Match as the cash source, 2 with Employee Pretax, and one with Employee after-tax. There were also 7 corresponding Bought transactions.

On the TRP website, the cash sources are listed as
Before tax
After tax
Company match
Company dividends
Roth
Seed
Share power

I think the duplicates in the downloaded cash sources are because there is a limited list of downloaded cash sources.

In Quicken, the cash sources for each holding are broken out on the Holdings tab in the Online Center but they sill use the downloaded sources..