Be Careful What You Toss

Plan record retention requirements

As far as the IRS is concerned, you can’t save too many retirement plan documents. Plan sponsors, on the other hand, might reasonably feel the need to free up file storage space every now and again by purging documents no longer needed. Where do you draw the line?

The law

The Internal Revenue Code provides that “books or records … must be kept available at all times for inspection by authorized internal revenue officers or employees, and must be retained so long as the contents … may become material in the administration of any internal revenue law.”

Fortunately, those documents don’t necessarily have to be maintained in hard copy form. Under Department of Labor regulations, it’s acceptable to maintain most records in electronic form, so long as:

  • The 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, in a safe and accessible place, and in such manner as they may be readily inspected or examined,
  • The electronic records can be readily converted into legible paper copies,
  • You establish and implement adequate records management practices, and
  • The electronic recordkeeping system isn’t subject to any agreement or restriction that would compromise a person’s ability to comply with any ERISA reporting and disclosure requirement.

Many retirement plan sponsors use third-party administrators (TPAs) for various plan services. According to the IRS, using a TPA for services involving electronic records doesn’t relieve the taxpayer (the plan sponsor) of its legal record keeping obligations and responsibilities. Even though a properly structured TPA service agreement allows some delegation of this responsibility, remember that final responsibility rests with the sponsor.

What to keep

Here’s a list of documents you should keep:

Plan documents. These files include the basic plan document, adoption agreement, amendments (if any), IRS determination letters, summary plan descriptions, summary of material modifications, annuity contracts, board and adopting resolutions, and trust records such as investment statements, balance sheets and income statements.

Fiduciary records. These records include plan committee meeting materials for review of fees and investments, fee disclosures, engagement letters, and TPA / service provider contracts.

Participant records. These files include enrollment forms, beneficiary designation forms, census data, account balances, contributions and earnings, qualified domestic relations orders, compensation data, and participant statements and notices. In addition, include distribution documentation, loan records and hardship withdrawal records.

Annual filings. Be sure to keep copies of each year’s Form 5500, including required schedules and supporting documents, summary annual reports, independent auditors’ reports (if your plan requires one), records of contribution allocations and required annual testing for coverage and nondiscrimination, and board minutes or similar declarations of the employer contribution amounts. Also maintain copies of any determination letter applications or similar filings (Form 5300 series).

Sponsors should keep these records until six years after terminating the plan and distributing all benefits.

Getting it right

Keeping all your plan records can seem like an overwhelming and daunting task, but it’s better to be safe than sorry. Consult with an ERISA attorney to assure full compliance with all applicable federal record retention requirements.

 

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