You may occasionally see VMFXX listed in your Gusto Retirement portfolio, even if you never selected it. This usually happens after your annual account fee is processed. This article explains why VMFXX may appear and how it gets resolved automatically.
When your annual account fee is due, we sell a small portion of your portfolio to cover the cost. Sometimes, the amount owed is so small that it does not meet the minimum trading requirement for your funds.
When that happens, we sell your assets in the following order to pay the fee:
Pre-tax employee and employer contribution sources (pro-rata)
Roth contribution sources (pro-rata)
After we use the sold funds to pay your fee, any leftover amount is used to purchase VMFXX, a Vanguard money market fund (a low-risk fund that holds short-term, high-quality investments). As a result, you may see VMFXX listed in your portfolio, even if you never selected it or set a target allocation for it.
For example: Say your only holding is VTSAX. If your account fee is $0.02 and the minimum amount that can be sold is $0.05, we would sell $0.05 of VTSAX, use $0.02 to pay the fee, and then purchase VMFXX with the remaining $0.03. A rebalance then automatically moves that small amount back into your chosen fund, VTSAX.
Note: You do not need to take any action. Our system automatically triggers a rebalance to remove VMFXX from your portfolio and return the funds to your selected investments.
Check out the fund lineup and ADV 2A Brochure for more information about account costs.¹
¹ Investment advisory services for Gusto Retirement's 401(k) (when 3(38) fiduciary services are appointed) and SEP IRA/IRA products are offered by Gusto Investment Services, LLC, an SEC-registered investment adviser.