At the end of each plan year, Gusto Retirement may make adjustments to employer contributions for your plan. This article explains what year-end adjustments are, why they happen, and the most common types you might see.
End-of-plan-year adjustments are employer contributions made after year-end for contributions that would normally be made each pay period. If your plan requires end-of-year adjustments, Gusto Retirement will begin processing them as soon as possible after the close of the plan year.
In some cases, we will need additional information from you before we can calculate the adjustments for your sponsored plan — like self-employment income compensation data for owners.
Several types of adjustments may be made after year-end:
Self-employment income (SEI) owner contributions — Owners who get SEI will not have compensation information until they prepare taxes for the business that sponsors the plan. If the plan has a non-elective contribution or match (which is processed each payroll for W-2 employees), the SEI owner will need an adjustment for these employer contributions after the end of the plan year.
Mid-year safe harbor nonelective contribution (SHNEC) additions — Plans that add a SHNEC mid-year, or that converted from a prior provider where the SHNEC was not collected per pay period, will require an adjustment at the end of the year to make sure all eligible participants get the correct SHNEC.
Matching contribution true-ups — Plans with a matching contribution may require a true-up under the terms of the plan document. Although Gusto Retirement does not offer true-ups as an optional plan feature, some plans may have a true-up in place from a prior provider that we need to maintain for the first year. These most commonly refer to plans with a matching contribution that elect to true up participants so they get the maximum match at the end of the year.
Other employer contribution shortfalls — Gusto Retirement may also use an end-of-year adjustment for situations where participants did not get enough employer contributions throughout the year.