Gusto 401(k) plan sponsors and participants can use this article to understand what Gusto Retirement's transition to its own broker-dealer means for your 401(k) plan.
Gusto Retirement is launching its own broker-dealer, Gusto Brokerage, LLC. As part of this change, if you use the brokerage services of Gusto Brokerage, LLC, the custodial services for your 401(k) plan will be provided by Pershing LLC instead of Benefit Trust Company. This transition is designed to be seamless for both plan sponsors and participants.
Understand broker-dealers
A broker-dealer is a financial institution that buys and sells securities, either for themselves (as a dealer) or on behalf of their customers (as a broker).
Broker-dealers are regulated by organizations like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) to ensure fair and ethical practices in securities markets. Their responsibilities include safeguarding customer assets, maintaining proper records, and following rules designed to protect investors.
Understand custodians
In the context of a 401(k) plan, a custodian is a financial institution responsible for holding and safeguarding plan assets. Their primary role is to ensure the security and proper administration of the plan's funds, which includes holding securities, processing transactions, and maintaining accurate records.
Custodians are regulated entities that play a key role in protecting plan participants' interests by ensuring assets are held safely in compliance with relevant regulations.
How this change affects plan sponsors
The transfer of plan assets is primarily a structural adjustment — not a change in how you manage or access your plan.
To facilitate this transition, plan sponsors will need to complete a task on their dashboard. You will get an email when the task is ready, which involves two steps:
Confirming company details: You will be asked to confirm details about your company, its control person, and any beneficial owners. Collecting this information is a legal obligation and standard compliance requirement.
Reviewing and signing updated agreements: The updated Service Agreement and 408(b)(2) Fee Disclosures formalize the new custodial arrangement and the relationship with Gusto Brokerage as a broker-dealer. Your plan's services and fees are not changing as a result of this update.
How this change affects participants
For 401(k) participants, the impact of this change is minimal. The way you manage investments, access funds, or view your account will not be affected. Your investment options, contribution processes, and withdrawal procedures also remain unchanged.
The primary benefit for participants comes from the increased flexibility and potential for future enhancements that come from us establishing our own broker-dealer.
Benefits of Gusto Retirement establishing a broker-dealer
Establishing our own broker-dealer gives us greater operational control and flexibility, enabling us to innovate and better serve our clients. Key benefits include:
Increased flexibility in product offerings: With our own broker-dealer, we have more direct control over financial operations. This can lead to greater flexibility in developing and introducing new product offerings, investment options, and features tailored to the evolving needs of plan sponsors and participants.
Enhanced operational control: Direct oversight of the brokerage function allows us to streamline processes, which can lead to more efficient service and quicker implementation of new features.
Continued focus on compliance and security: While the custodian changes, our commitment to robust compliance and the security of plan assets remains a top priority. The new structure is designed to meet all necessary regulatory requirements.