How should you record 401k "Qualified Non-Elective Contributions" transactions?

Question

I'm not sure if this is correct, but I'm under the impression that "Qualified Non-Elective Contributions" transactions are funds provided by the employer not employee. If that is correct, then at the end of the day the cash balance in the 401k account should not change after this has been recorded, only a small increase in # of shares (like a dividend reinvested).

Now in terms of Quicken, should I record this in one transaction of type "Shares Added"? Or is there a better more correct way?

Keith Free Ellis · Answer

Thanks @QuickUserPSP  - First step was confirming it's free money like the match. For some reason the match portion is never documented on my employers payroll or benefit sites. Fun times! Share balances are trued up which is the main thing, but getting to the root of a couple more unusual transactions like the QNEC that leave the cash balance not zero has been tough.

[Deleted User] · Answer

@Keith Free Ellis I forgot to mention that you will need to set up a new contribution category for Qualified Non-Elective Contributions (QNEC).  There is no standard category name so you can use whatever suits you.

[Deleted User] · Answer

@Keith Free Ellis Qualified Non-Elective Contributions (QNECs) are contributions given by the employer to non-highly compensated employees.  This is done solely to pass compliance testing.  Not to get into detail, compliance testing is mandated by ERISA to ensure 401(k) plans benefit everyone.  If they find that the executives have contributed a larger percentage than the rest of the employees, the executives then need get a refund of their contributions, or the other employees given an extra amount.

This QNEC is treated just like any other contribution to your 401(K) plan.  Cash is increased and investments are purchased in accordance of your investment elections in place at the time of the contribution.  You do not have to do anything but enter the transaction to Quicken the same way your employer deposited to your 401(k) account.