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Record Retention: What to Hold, When to Fold

Posted by Wende Wadsworth, Audit Shareholder on Oct 19, 2020 6:59:37 PM

2- What to Hold When to FoldHow long must plan sponsors maintain records? The easy answer is: “For a long time.” The more nuanced answer is: “It depends.”

Although ERISA does not specify a penalty for failing to properly maintain records, the same civil and criminal penalties apply as with knowingly violating any other ERISA provision.

ERISA Provisions

Specifically, two provisions of ERISA directly address record retention:

 1. Reporting and Disclosure Records: Under ERISA Section 107, plan fiduciaries must ensure that all records pertaining to agency filings or to participant or beneficiary disclosures are available for examination for at least six years after the IRS Form 5500 filing date.

So, in essence, any form you file with the government is subject to the six-year retention requirement, including these records:

Form 5500 (including all required schedules and attachments)

  • Actuarial statements and valuations
  • Determination letter applications and similar filings
  • Summary plan descriptions and summaries of material modifications
  • Participant benefits statements
  • Nondiscrimination and coverage test results
  • Required employee communications
  • Corporate income-tax returns (to reconcile deductions)

2. Benefit Determination Records: ERISA Section 209 contains a much broader recordkeeping requirement that relates to the maintenance of records needed to determine the benefits that are or may become due to each employee. It states that an employer must “maintain benefit records with respect to each of (its) employees sufficient to determine the benefits due or which may become due to such employees.” 

DOL regulations go on to state that records must be maintained for “as long as they may be relevant to a determination of benefit entitlements.” When there is no possibility of records being relevant to benefits determination, they may be disposed of — unless they are “required to be maintained for a longer period under any other law.” 

Ultimately, ERISA does not establish a statute of limitations for benefit claims. In fact, benefits might not be due to a participant for 20, 30, 40 or even 50 years. With that in mind, plan sponsors should assume records such as the following should be maintained indefinitely:

  • Age and service records that are used to determine waiting periods, eligibility, vesting, breaks in service and benefits
  • Payroll records
  • Benefit claim procedures and procedures for reviewing denied claims
  • Election forms (including COBRA notices)
  • Support and documentation relating to plan loans, withdrawals and distributions
  • Board or administrative committee minutes and resolutions
  • Trust documents, such as investment statements, balance sheets and income statements

Understanding Electronic Data Retention

Generally speaking, most original paper records may be disposed of once they are transferred to an electronic record-keeping system that complies with DOL requirements.

These requirements hold plan fiduciaries responsible for ensuring that reasonable controls are in place to ensure the integrity, accuracy, authenticity and reliability of the records kept in electronic form. The electronic records must be maintained in reasonable order and in such manner as they may be readily inspected or examined. Here, it may make sense to use one of the email archive services available in the marketplace to manage email storage, retention and production. 

Understanding Your Fiduciary Duty

While many plans delegate record-keeping to a third-party administrator, it’s critical to understand that plan sponsors cannot outsource their fiduciary duty to ensure appropriate document retention.

Certainly, plan administrators may rely on a service provider’s record-keeping system to maintain historical records of plan activity. However, benefits determination is ultimately the responsibility of the plan sponsor. Along with that comes the responsibility for maintaining copies of all reports generated from service provider systems.

A good place to start is adopting a written retention policy outlining steps for staff to follow. Inventory current records and sort them into those related to reporting and disclosure records and those related to benefit determination records. Also note the format in which the records are retained and where they are stored.

Depending on the volume of documentation, it may make sense to work with an attorney or consultant who has specific experience with record retention requirements.

Have more questions about document retention? We can provide guidance.

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