When a 401(k) plan terminates before the end of the plan year, Gusto Retirement runs a short-year compliance test as part of the offboarding process. This article explains what that test covers and what compensation data we may need from you.
Short-year compliance testing is the final compliance review for a 401(k) plan that terminates before the last day of the plan year (December 31 for all Gusto Retirement plans). Gusto Retirement performs short-year compliance testing as part of the offboarding process.
Instead of testing the plan using data from a full plan year, the data spans from January 1 through the plan's termination date. For example, if your Gusto Retirement plan ended on Aug. 17, we would test the plan using payroll data from January 1 through Aug. 17 of that year.
To accurately run short-year compliance testing for a plan that is shutting down, Gusto Retirement may ask that final compensation amounts be reported. The data needed depends on the payroll provider your company used and what kind of wages your company paid in the year the plan ended.