Legacy assets that must be resolved before converting to Gusto Retirement

Gusto Retirement’s plan document and recordkeeping platform are built for a standard 401(k). Some older or more unusual asset types require distribution rules, tax tracking, or investment options that Gusto Retirement’s platform does not support. If your plan holds one of those asset types, that money generally has to be fully liquidated and/or distributed to the affected participants (if legally permissible) before your plan can convert.

Distributing an asset to resolve this is only possible if the participant already has a right to take a distribution and is doing so at their own discretion, with no influence or pressure from the plan sponsor. Converting to Gusto does not, by itself, create a new right to distribute money that the plan and the law do not already allow. If a participant has no permissible way to take a distribution of one of these assets, resolving it takes more than paperwork, and it’s worth involving your plan’s advisor or counsel.

If your plan holds any of the following investments and you’re unable to fully liquidate them prior to conversion, flag it with your Account Executive as early as possible.

• Self-directed brokerage account balances. These need to be liquidated and the cash deposited back into the plan’s trust account. Gusto’s platform does not offer a self-directed brokerage window.

• Investments that cannot be immediately liquidated and transferred, like stable value funds, guaranteed investment contracts (GICs), non-publicly traded assets or other illiquid holdings. A conversion requires the plan’s investments to become cash, or transfer directly, within the conversion timeline.

If your plan holds any of the following asset types, flag it with your Account Executive as early as possible, since it may block your conversion.

• Assets merged in from a money purchase pension plan, defined benefit plan, cash balance plan, or target benefit plan. These plan types generally come with survivor annuity and spousal consent rules that stay attached to the money even after it merges into a 401(k) plan. Gusto’s platform does not administer those rules. Often these assets have distribution restrictions.

• Balances converted to Roth status through an in-plan Roth rollover or transfer. These conversions require their own tax tracking, which Gusto’s platform does not support.

• Employer contributions originally made as Roth contributions. This is different from a participant choosing to make their own deferrals as Roth, which Gusto’s platform does support.

• Voluntary deductible contributions made before 1986. This is a specific contribution type the tax law no longer allows after 1986. It also requires its own tax tracking that Gusto’s platform does not support.

• Voluntary after-tax contributions (non-Roth). Sometimes called voluntary nondeductible contributions, these assets may be distributable at any time but must be requested at the participant’s discretion. Check your current plan document to confirm your plan allows that, since not every plan document is written the same way.

Flag any of these asset or investment types with your Account Executive as soon as you notice them, and well before your target conversion date. That gives everyone time to confirm whether the affected participants have a permissible way to take a distribution, and to look at other options if they do not, before the conversion date is at risk.

These asset and investment types are uncommon, and most plans converting to Gusto will not have any of them. If your plan does, resolving it takes some lead time, so the earlier you flag it, the less likely it is to delay your conversion date.

Check your plan document or talk with your plan’s advisor about whether your plan holds any of these asset or investment types and how to resolve them.