401(k) Employer Match — Accrual and Deposit to Plan Trustee
Accruing the employer 401(k) matching contribution as employees make their deferrals — recognizing the expense when earned and depositing to the plan trustee within regulatory deadlines.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| 401(k) Match Expense (50% of Employee Deferral up to 6% of Pay) | Expense (+) | 485,000.00 | - |
| 401(k) Match Payable — Plan Trustee (Deposit Due Within 7 Business Days) | Liability (+) | - | 485,000.00 |
💡 Accountant's Note
Employer 401(k) matching is a significant compensation cost — common formula: 100% match on the first 3% of salary deferred, or 50% match on the first 6% deferred. For a $1M payroll: if employees defer an average of 5% ($50,000), the 50% match = $25,000/pay period. The expense must be accrued in the period the employee earns the wages and makes the deferral — matching is earned payroll-period by payroll-period. ERISA fiduciary duty: employer matching contributions must be deposited to the plan trustee as soon as administratively feasible (the DOL's interpretation: within 7 business days of withholding for plans with 100+ participants; smaller plans within 3 days). Late deposits of employee deferrals (not employer match — this is an employee's money) are a DOL violation requiring 'prohibited transaction' correction (interest to the plan). Vesting schedules on employer match: many employers use cliff vesting (match forfeited if employee leaves before 3 years) or graded vesting (20%/year) — unvested amounts that are forfeited upon termination reduce future employer match expense.
Practitioner & Systems Framework
💻 ERP Architecture
401(k) administration is typically handled by a plan record-keeper (Fidelity, Vanguard, Empower, Principal, Transamerica). The payroll system sends a 'funding file' after each payroll — employee deferrals + employer match — to the record-keeper for investment. ERISA requires transmittal 'as soon as reasonably segregated from company assets' — the fiduciary duty clock starts ticking when the employee's deferral is withheld from their paycheck. Late transmittals (common at small employers who use the deferrals temporarily for cash flow) are the most common ERISA violation found in DOL audits.
⚠️ Audit Flags
401(k) plan audits (required for plans with 100+ participants) are conducted by independent auditors under DOL/ERISA requirements. Auditors test: (1) Timeliness of deposit — did all employee deferrals reach the plan trustee within the 7-business-day window? (2) Accuracy of match calculation — is the match formula applied correctly (including the wage base, vesting schedule)? (3) Forfeitures — are forfeited unvested match amounts correctly applied (to reduce future employer contributions or pay plan expenses)?
📄 Required Documentation
401(k) plan document (match formula, vesting schedule, employer contribution deposit timing policy), payroll records (employee deferral amounts by pay period), plan funding file transmittals (date withheld from paycheck vs. date deposited to trustee), record-keeper statements confirming deposits, forfeiture account balance and application, annual Form 5500 (plan financial report), plan audit report (for large plans), and DOL correspondence (for any late deposit correction filings).
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