Corporate transactions — acquisitions, mergers, and consolidations — can affect your Gusto 401(k) plan in several ways. The right path forward depends on the type of transaction, how the companies plan to operate afterward, and the terms of the purchase agreement. We recommend working with qualified tax and ERISA (Employee Retirement Income Security Act) counsel when deciding what to do with any existing retirement plans.
Important: Timing matters. The IRS may close off certain options once a transaction closes. Make sure the purchase agreement does not contradict the options the companies have chosen for the retirement plan.
If your company is involved in an acquisition or merger, notify us as soon as possible. Gusto Retirement relies on direction from the companies involved to understand how to treat a 401(k) plan when a transaction takes place. The earlier you reach out, the more options you may have.
Depending on the type of transaction and how the companies plan to operate afterward, you generally have a few paths available.
If your company has become part of a controlled group of employers or is operating as a division of the acquiring company, you may be able to keep your plan at Gusto Retirement. Contact us to discuss possible options for continuing with Gusto Retirement as your plan's service provider.
If both companies have a Gusto 401(k) plan and want to continue operating separately within a legally related group, both plans can remain active. Contact us to discuss what this arrangement requires.
If both companies have a Gusto 401(k) plan and you choose to merge them into a single plan, here is what to expect:
Participants will have accounts established in the surviving plan once they are onboarded into the surviving company's payroll records
Gusto Retirement will automatically transfer assets from the former plan to the surviving plan — individual participants do not need to take any action
Participants will not be given the option to take a distribution based solely on the plan merger
Gusto Retirement will file a Final Form 5500 to document the merger of the plans
Gusto Retirement will file the standard Form 5500 for the surviving plan showing the assets transferred from the merged plan
If you decide to move your 401(k) plan away from Gusto Retirement, there are two ways to do this.
Transfer (deconversion)
A deconversion moves your 401(k) plan to a new service provider. The plan itself stays the same — only the provider changes. The Employer Identification Number (EIN) and plan number will not change. It is not uncommon for sponsors to update plan provisions at the same time as a transfer, but a deconversion does not require those changes.
External merger
In an external merger, your existing plan is merged into a 401(k) plan at a new provider. Both the plan and the provider change. A Final Form 5500 is filed to show that all plan assets have been transferred to the new plan.
Note: The external merger process also applies to internal mergers, where one Gusto Retirement plan merges into another Gusto Retirement plan.
If you are unsure how to handle your company's 401(k) plan after an acquisition or merger, consult a legal professional for guidance. You can also contact Gusto Retirement support to discuss your specific situation and available options.