401(k) Plan
What is a 401(k) plan?
A 401(k) plan is an employer-sponsored retirement plan that lets employees contribute part of their pay to individual retirement accounts, often with an employer contribution. The IRS publishes the rules for these plans.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that records employee deferrals and employer contributions in the right accounts, so retirement plan balances reconcile.
How it works in the books
- Employee deferrals are withheld from pay and held as a liability until sent to the plan
- Employer contributions are recorded as an expense
- Reconcile plan liabilities with the provider statements every month
Why it matters for service firms
Retirement plans are a common benefit for service firms competing for talent. Accurate and timely deposits protect employees and keep the firm in good standing with plan rules.
Frequently asked questions
Who is responsible for sending employee contributions?
The employer is responsible for sending withheld contributions to the plan on time. Late deposits can create compliance problems, so build the deposit into each payroll cycle and confirm timing with your plan provider.
Should the firm talk to a professional before starting a plan?
Yes. Plan design, costs, and compliance rules are technical. A plan provider, your accountant, and where needed an attorney can help you choose and administer a plan.
Official source: IRS: 401(k) plans.
This page is for informational purposes only and does not constitute formal legal or tax advice. Always consult a qualified tax professional about your specific situation.
Related terms and guides: employee benefits, payroll processing, payroll liability, and PTO accrual.