A residual dividend is a payment made by a company to its shareholders after it has paid for its capital expenditures and working capital costs. Because 401(k) assets held by Gusto Retirement are invested in mutual funds, they may receive residual dividends on a quarterly, semi-annual, or even annual basis.
When a 401(k) plan is being transferred from one 401(k) provider to another, all of the plan assets must be 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 time the 401(k) plan assets at Gusto Retirement were invested in the mutual fund that earned such residual dividends. These residual dividends may be paid after your 401(k) plan is transferred to another provider.
In order to get these additional earnings over to your new 401(k) service provider, Gusto Retirement will send a second wire to your new 401(k) provider consisting of the residual dividends. Gusto Retirement will also provide reporting to assist the new 401(k) service provider with allocating the dividends to the correct participant accounts. Once generated, this reporting is posted for plan administrators in the Resource Library section of their 401(k) administrator dashboard.