401K and Employer Contribution Part 2

[Mark Eackloff]

I agree with the idea of two accounts only if you want to recognized the unvested part as having been "realized."  But I wouldn't bypass the P&L accounts to get it into Equity.  You worked for it and the IRS will treat it as earned income (when you eventually draw from your account).  It did not just drop out of the sky.

If you want to follow a practice that resembles GAAP (Generally Accepted Accounting Principles), you don't record the unvested part.  It doesn't belong on the balance sheet (or on the income statement) because it hasn't happended yet and you havn't completed your performance with respect to earning that money.  But record it as revenue when it becomes vested.  You should get statements from the fund custodian at least once a year showing both you vested and unvested amounts.  I probably wouldn't bother updating you "books" more often than once per year.

Mark Eackloff, CPA
(at least I'm a CPA in Maryland)

Derek Atkins wrote:
> unfortunately gnucash does not keep track of vesting rights, so there
> is no way to really do it.  I suppose you could have two Equity
> accounts, one for the fully-vested and one for the will-vest-over-time
> inclusions.  But there's no way to keep track of the fact that some of
> your matching contributions are vested and some are not (assuming the
> contributions vest at different times).
> 
> -derek
> 
> "T. Cabugao" <tycabugao at earthlink.net> writes:
> 
> 
>>Hello!
>>
>>I know I asked a question about 401k's and employer contributions a
>>few weeks back. Derek suggested that I create an account under Equity
>>to account for the employer's matching contribution. This seems like
>>it would work. However, I just realized I have another problem (a
>>GNUCash problem, but it is a nice problem to have) with my situation:
>>
>>In addition to the matching contribution that my employer makes based
>>on my contribution to my 401k, my employer also makes another
>>contribution based on my salary. I get this "base" contribution
>>whether I participate in the 401k plan or not. The difference between
>>the "matching" and the "base" contributions is that the "matching" is
>>100% vested upon deposit into my 401k account, and the "base" will not
>>be 100% vested until after a certain number of years that I have been
>>working there. I was wondering the best way to account for this "base"
>>contribution.
>>
>>Any suggestions on setting up my accounts so I can easily
>>differentiate between the "vested" and "unvested" parts of the 401k
>>account (the "base contributions are deposited into the same 401k
>>account with my contributions and my employer's matching
>>contributions) when creating reports? It should also be a system where
>>it would be easy to permanently "absorb" the "base" contributions once
>>I do get vested. Or, if I leave the company (it's a good company, but
>>I work in the IT field, so leaving may not be my decision) before
>>getting vested, it should be a system where I can make the unvested
>>part easily "disappear."... Any suggestions?
>>
>>Thanks!
>>_______________________________________________
>>gnucash-user mailing list
>>gnucash-user at lists.gnucash.org
>>https://lists.gnucash.org/mailman/listinfo/gnucash-user
>>
>>
> 
>