When an employee leaves your company voluntarily or due to termination, your 401(k) roster must be updated to reflect their dismissal. How the 401(k) roster is updated varies based on your payroll provider.
For Gusto or Gusto Embedded payroll
If you use Gusto or a Gusto Embedded payroll provider, , enter the termination status and date for the recently terminated employee directly in your payroll platform. Learn how to mark an employee as dismissed in Gusto.
Be sure to wait until you have processed the employee’s final payroll before entering a termination date in payroll. Contributions will stop processing for that employee once they are marked as dismissed in your 401(k).
Once added, information will automatically transfer over to your 401(k) overnight. Once you enter a termination date in payroll, no further action is needed.
For self-service plans
For self-service plans using a non-Gusto payroll provider you must log into your 401(k) administrator dashboard and add a termination date directly to the employee’s profile on your Roster.
What happens when an employee is listed as dismissed
In about one week from when the employee is listed as dismissed in your 401(k) plan, our system will automatically send an email notification and dashboard task sharing what they can do with their 401(k) after leaving your company, such as request a distribution, rollover to an IRA or other retirement plan, or keep their account with us (if applicable).
Starting with the first full month after termination, your plan will no longer be billed the monthly participant fee for the dismissed employee. For example, if an employee was listed as dismissed on January 15, they will be included on your January invoice and billed in February. However, they will not be included on your February invoice, billed in March and moving forward. You can learn more about our invoicing and billing practices here.
Please note that although terminated employees are removed from your monthly billing, they will remain on your 401(k) roster with a "Dismissed" status for record-keeping purposes. As mentioned above, to see those employees, you’ll need to update the applied filter by clicking on the “Status” filter button, then unchecking "Active" in the Roster section.