When your Gusto 401(k) plan transfers to a new provider, you may get additional payments after the transfer is complete. This article explains what residual dividends are, why they can arrive after your plan has moved, and how we get them to your new provider.
A residual dividend is a payment a mutual fund makes to its shareholders after covering capital expenditures and working capital costs. Because Gusto 401(k) assets are invested in mutual funds, they may earn residual dividends on a quarterly, semi-annual, or annual basis.
When a 401(k) plan transfers from one provider to another, all plan assets are liquidated during the week of the transfer. Once liquidated, these assets are no longer invested in the market.
However, they can still earn residual dividends from the period when the plan assets were invested in a mutual fund. These dividends may be paid out after your plan has already moved to the new provider.
To get these additional earnings to your new 401(k) provider, we take two steps:
Wire transfer — We send a second wire to your new 401(k) provider with the residual dividend amount.
Reporting — We provide reporting to help the new provider allocate the dividends to the correct participant accounts.
Once the reporting is ready, plan administrators can find it in the Resource Library section of their 401(k) administrator dashboard.