If your business is part of a legally related group, compliance testing works a bit differently. This article explains why, and how to check your ADP and ACP test status across all entities in your group. By regularly checking your Gusto 401(k) administrator dashboard and addressing any warnings or failures, you can avoid costly corrections and make sure your organization meets IRS nondiscrimination requirements.
The Internal Revenue Service (IRS) requires 401(k) plans to undergo yearly compliance testing. This testing makes sure the plan does not unfairly favor business owners and highly compensated employees (HCEs) over other employees.
For businesses with multiple related entities — like a parent company and its subsidiaries — the rules governing compliance testing are more complex. The IRS treats all entities within a legally related group (LRG) as a single employer. This means employee and pay information for all related companies must be considered together to determine if the 401(k) plan meets nondiscrimination rules across the entire group.
With Gusto Retirement, you can see a holistic view of compliance status for Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) testing for all entities within your legally related group. This helps you avoid failures and costly corrections.
Choose the path that matches how you signed in to review your test status.
If you accessed your dashboard via your main Gusto account (Benefits > Active Benefits > 401(k) > Manage), follow these steps:
Select Compliance in your dashboard menu.
Scroll to the View compliance dashboard section.
If you used the direct Gusto Retirement sign-in page, follow these steps:
Select your company name in the upper-right corner of the screen.
Select Compliance from the dropdown menu.
Scroll to the View compliance dashboard section.
At the top of your Compliance dashboard, you can review the ADP and ACP test status of all entities.
Needs attention — The group has failed compliance testing, and each plan may require corrections. Depending on the issue, we will contact the trustee of the plans that are contributing to failures. If you get a task or email, you will see next steps to correct your plan.
Passed — The group is within passing requirements
This section within the dashboard provides details on the status of nondiscrimination testing results for ADP and ACP tests. You can learn more about each test by hovering over the name in the Test column.
To view detailed information about a test status, select View details.
Within the Test Details page, you can see your ADP and ACP test results and review next steps for fixing issues and tips to avoid failures in the future. If you failed a test, we will also send you a task to correct your plan.
Note: Top-heavy test results are not available in the dashboard at this time. We will send a notification to the plan trustee if any related corrections are required for this test.