Setting up Employer Match in Paycheck

jlwoodard's Avatar

jlwoodard

19 Aug, 2009 02:14 PM

I was trying to set up my paycheck in Moneydance and had trouble understanding how to set up a matching retirement contribution from an employer. I read a few excellent discussions (an FAQ would be helpful), but it seemed that the bottom line is that I will need 2 separate transactions rather than setting it all up into one transaction. I can set up my paycheck properly with the gross income less the taxes, insurance, and my own retirement contributions. Because my employer makes their contribution directly without it coming through my hands, the only way I can get things to work is to receive the employer contribution into my investment account using an income category (e.g., 403b:Employer Contributions), which raises the cash balance, then executing a Buy transaction when shares are purchased.

Do I have that logic right? It would be great to set everything up in a single transaction when I record my paycheck, but perhaps the double-entry system requires the second transaction? Many thanks in advance!

John

  1. 1 Posted by Brian Adler on 19 Aug, 2009 05:41 PM

    Brian Adler's Avatar

    John,

    While there are a variety of ways to accomplish this, it can be done as a single split transaction.

    Set up your split transaction as you normally would (from your bank account register) with your gross income and the various deductions from that gross. Then in your 2nd to last item of the split include a deposit reflecting your employers contribution to your investment account (even though you are making this entry into your bank account). In your last item of the split include a payment to your investment account equalling your employers contribution.

    You will still have to execute a Buy transaction from your investment account, however. So perhaps that is functionally no better than what you've described. I don't believe it is possible to enter everything as a single transaction which includes the purchase of shares in the investment account.

    Brian

  2. 2 Posted by jlwoodard on 20 Aug, 2009 03:42 AM

    jlwoodard's Avatar

    Thanks for your suggestion, Brian--I'm still having a bit of trouble with it though. I'm OK with making a separate Buy transaction. It's just getting the employer match to line up, which is where I'm getting hung up.

    I followed your suggestion and in the 2nd to last split, I made a deposit into the Fidelity account for the amount of my employers contribution. Then in the last item of the split, I made a payment to the Fidelity account for my employer's contribution amount. The net deposit was 0 though, since I added and subtracted the same amount from the same account, so there would be no cash balance to buy shares with.

    I have a feeling that the categories ot the two split transactions should be different perhaps? If I make a deposit for the contribution into an income account (403b:Employer Contribution) as the 2nd to last split transaction, then a payment to the Fidelity account in the last split transaction, I get the right amount in the bank account and in the Fidelity account. However, the money in the 403b:Employer Contribution income category will continue to grow, rather than net to 0. I would think that once the money went to the 403b:Employer Contribution category, the money going to Fidelity should come out of that category.

    I'm sure I'm making this harder than it has to be, but if you have additional suggestions about the categories/accounts to assign those last two split transactions to, I'd be very grateful. Many thanks in advance!

    John

  3. 3 Posted by Brian Adler on 20 Aug, 2009 02:53 PM

    Brian Adler's Avatar

    John,

    This is a transaction occurring in your bank account. The 2nd to last split is a deposit with the category listed as your 403b:Employer Contribution. The last split is a payment with the category listed as your Fidelity account.

    So this entire split deposit is going into your bank account, but the last two items will zero out. The net effect is that your 403b:Employer Contribution category will show the total amount of their contribution (which grows over time). And your investment account will be the beneficiary of the actual funds. Does that make sense?

    Brian

  4. 4 Posted by jlwoodard on 21 Aug, 2009 02:30 AM

    jlwoodard's Avatar

    Thanks so much Brian! I think I finally understand now. Many thanks for you suggestion!!

    John

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