Retirement Plan Record Retention

Mary Beth Madlin (Jun, 2017)

We are often asked by our clients how long they must keep records for their company’s retirement plan.  The easy answer is FOREVER, but you don’t have to keep everything and can go paperless with some planning!  If you are the plan sponsor of a retirement plan covered under the Employee Retirement Income Security Act (ERISA), Sections 107 and 209 speak to record retention of employee plans.

ERISA wants records used to support information reported on Form 5500 filings to be kept for a period of at least six years after the Form 5500 filing date. Information relative to the employees participating in the plan should be retained for an indefinite period of time.  These records may be retained electronically when certain requirements are met.

Under ERISA Section 107, plan level information that should be kept for a period of at least six years, includes (but is not limited to) items such as:

  • Form 5500s (including all required schedules and attachments)
  • Nondiscrimination and coverage test results
  • Required employee communications and notices
    • Investment statements
    • Balance sheet and income statements
    • Audited financial statements (if applicable)
    • Evidence of Plan’s fidelity bond
    • Corporate income-tax returns (to reconcile deductions)
    • Information used to prepare any of the required Form 5500 Schedules

Under ERISA Section 209, the participant level records to keep for an indefinite period of time to determine the benefit that is due (or may become due), includes (but is not limited to) items such as:

  • The original signed and dated Plan documents and items related to the plan document such as Prototype adoption agreements, amendments, summaries of material modifications (SMMs), summary plan descriptions (SPDs) and the most recent IRS determination letter
  • Board or administrative committee minutes and resolutions
  • Census data and support for such information including records that are used to determine eligibility, vesting and calculated benefits
  • Compensation data as many benefits relate to level of pay
  • Participant account balances, contributions and investment earnings
  • Support and documentation relating to plan loans, withdrawals and distributions, and
  • Form 1099-Rs that report distributions made from the plan

Also, keep these employee election forms up-to-date (maybe in a three ring binder):

  • Salary deferral agreements
  • Beneficiary forms
  • Investment allocation forms

Keeping out of the ordinary documents such as QDROs in the case of a divorce, VCP submissions and DOL or IRS notices is also advised.

If your plan’s recordkeeping is maintained on a platform, such as Empower, Fidelity, Voya, etc. you should download the information off of the plan sponsor’s website at least annually and save to your own computer or server.  If your Third Party Plan administrator (TPA) has a portal where information is stored for your convenience you should download the information off of the portal at least annually and save to your own computer or server.  Many TPAs have record retention policies and will not take responsibility for maintaining this information indefinitely.

You should keep retirement plan records until the plan has been terminated, all benefits have been paid out and enough time has passed that the plan won’t be audited.  That being said, you don’t need to keep huge paper files of your plan information. Scanned copies of documentation can be saved to your computer or server as long as they are being backed up regularly.  The Department of Labor (DOL) states that using electronic media to comply with record retention requirements is acceptable as long as the following conditions are met:

  • Recordkeeping system has reasonable controls to ensure the integrity, accuracy, authenticity and reliability of the records kept in electronic form
  • The electronic records are maintained in reasonable order and in a safe, accessible place and in such manner as they may be readily inspected or examined
  • Records are readily convertible into legible and readable paper copy
  • Recordkeeping system is not subject to any agreement or restriction that would compromise or limit a person’s ability to comply with any reporting and disclosure requirement or any other obligation under Title I or ERISA
  • Adequate records management practices are established and implemented

Original paper records may be disposed of any time after they are transferred to an electronic recordkeeping system that complies with the requirements noted above.  However, original records may not be discarded if the electronic record would not constitute a duplicate or substitute record under the terms of the plan and applicable federal or state law.  Proper data retention will assist the plan sponsor in meeting any fiduciary duties of ERISA.

WHY does this matter?  You want to be prepared when a former employee contacts you 10 or 15 years from now looking for money from the retirement plan.  You should have the information available to show if he/she was already paid out in a previous year.  Other issues that may arise where accurate employer records are imperative is when the employer is faced with a participant claim regarding the accuracy of his/her benefit, an employee is going through a divorce and the attorneys want to know how much accumulated in the plan during marriage, or there is a law suit, discovery of an operational error or a plan audit.

Retirement plans are designed to be long-term programs that benefit employees.  As a result, plan records may cover many years of transactions.  The IRS and ERISA require plan sponsors to keep records of these transactions because they may become material in administering pension law.  WHEN IN DOUBT, SAVE IT!

Please contact Mary Beth Madlin or Tina D’Agata in our Pension Department at Dermody, Burke & Brown with any questions that you may have.

 

The information reflected in this article was current at the time of publication.  This information will not be modified or updated for any subsequent tax law changes, if any.

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