Defined Contribution Retirement Plan

1) Create an investment account especially for this activity. DO NOT make it a "Single Mutual Fund" account. DO NOT link it to a checking account. DO make it a "Tax Deferred or Tax-Exempt" account. DO make transfers into the account non-taxable.

2) Create an INCOME category "Employer Defined Benefit Contrib" (abbreviating as necessary. DO NOT associate this line with a Tax-Line.

3) Create a memorized transaction in an existing cash-type account. The transaction will have a net zero amount. The splits will consist of an line for the "Emp Def Contrib" (or whatever) category, with an appropriate amount AND a 2nd line to to your Investment account (step 1) with a negative amount. The net will be zero. Don't worry about the negative sign, it'll work.

4) Schedule the transaction to occur each payday.

5) After running the transaction to deposit the employers money in your investment account, go to the investment account and record the appropriate investment purchases.

QED

Dan,

Thanks for your advice. I have set it up as you suggested.

I do have a question regarding step #1. I have setup a investment brokerage account and I have designated it as tax-deferred. However, I did not see an option for making transfers into the account non-taxable. How do I do this?

I am using Q2006 Premier H&B.

Thanks.

-- Randy

Randy, I'm using H&B 2005, but that shouldn't be a BIG (if, any) difference.

Use Control-A to open the accounts list Highlight the particular account Click Edit at the top of the Accounts List window Click "Tax Schedule Info" at the bottom of the Account Details window A window will open where you can specify the tax handling of the account (specifically, of the income received within the account) and of transfers to/from the account.

It's quite possible that the account is already set properly ... but it never hurts to check.

Dan

Refer to Step #2 in danbrown's reply - following the recommendation for setting up an income category. By not making a tax line assignment to this category, this income will not be reported in QW as taxable. You do not need to do anything else - you should be covered. You are depositing non-taxable income into a tax-deferred account.

You will have to set the 'Transfers Out' attribute for the account when you start making withdrawals.

You can verify your results by running QW's Tax Schedule Report.

Update to my original answer ('cause I'd forgotten that you CAN assign a category to cash transfers INTO a non-checking linked Investment account)..

Still do step 1. Still do step 2. Change step 3 to create a "Cash Deposit" transaction within the investment account. Assign the "Emp Def Contrib" as the category on the transaction. Still do step 4 (only, now, it's an investment transaction.) Still do step 5.

As JM correctly stated, setting the tax status in step 2 will handle the tax treatment of the employer deposit. Still doesn't hurt to double-check.

db

Dan and JM,

Regarding step 1... The Tax Schedule Information dialog has a checkbox indicating it is a "Tax-Deferred or Tax-Exempt Account". The dialog also has two optional combo boxes for specifying tax schedules: - Transfers In - Transfers Out Both of the combo boxes are blank. It sounds like this is the correct setup.

Regarding steps 3-4... This is much nicer as everything is contained in the one account! With the original method, the other account (I was using a checking account) had a $0 entry every week.

Thanks again for your helpful advice.

Randy, There's 2 different circumstances where the "Transfers Out" come into play ... and, naturally, they have different tax situations.

1) You've left this employer and are transferring any vested amounts to a rollover account at another trustee (bank, broker, mutual fund company, etc.). Transfers out in this case will be non-taxable. Indeed, the check will be made payable to the new trustees's name For Benefit of the Account of Randy Stevens. You can deposit the check to the new account, but technically it's not in your name and this withdrawal is NOT taxable.

2) You can, for any number of reasons as specificied by your plan, start to withdraw from the plan. These payments are made to YOU and ARE taxable.

SO, for the time being, the settings are probable correct. You just need to keep in mind that different actions (rollover vs. withdraw) have different results.

db