Commentary: Retirement plan records retention -- Save what? For how

Daily Record (Rochester, NY), Dec 22, 2007 by Jean M Dailey

The Employee Retirement Income Security Act (ERISA) has specific reporting and disclosure requirements for qualified retirement plans.

ERISA also requires plans sponsors to retain records that support information included in the reports and disclosures for a fixed period of time.

What needs to be kept?

The Department of Labor (DOL) requires qualified plan sponsors to file information with various agencies on an annual basis. This generally is met by filing Form 5500 Annual Report/Return of Employee Benefit Plan and related attachments for each qualified plan.

All records underlying the filing and other mandated reporting and disclosure should be retained. Plan sponsors also must distribute or make available certain plan-related materials to participants and their beneficiaries. This includes the summary plan description as well as the summary annual report. ERISA also requires plan sponsors to give participants access to the plan document and related materials upon request.

The responsibility to retain records lies with the employer, as the plan sponsor. While it is common for an employer to contract with an outside service provider who may provide certain reports and prepare the 5500 filing, the employer ultimately is responsible for retaining adequate records that support these reports and filings. In addition, the DOL requires employers to maintain records sufficient to determine the amount of benefits accrued by each participant.

Documents a qualified retirement plan sponsor must retain include the following:

* The original, signed and dated plan document and all original signed and dated plan amendments. Make sure dates and signatures are easily visible;

* Copies of all corporate/ partnership actions and administrative committee actions relating to the plan;

* Copies of all communications to employees. This may include videos, slides and e-mails;

* A copy of the most recent determination letter from the IRS, or the form to request the determination letter, if one is pending;

* All financial reports, including trustees' reports, journals, ledgers, certified audits, investment analyses, balance sheets and income and expense statements;

* Copies of Form 5500 and attachments;

* Payroll records used to determine eligibility and contributions, including details supporting any exclusion from participation. It is critical that employers keep complete census data, not just data on those who are eligible. It may be necessary to prove to the IRS or an employee making a claim for benefits that the individual was not eligible to participate;

* Hours of service and vesting determinations;

* Plan distribution records, including Forms 1099R;

* Corporate income tax returns (to reconcile deductions);

* Evidence of the plan's fidelity bond;

* Documentation supporting the trust's ownership of plan assets;

* Copies of all documents relating to plan loans, withdrawals and distributions, including copies of spousal consents;

* Copies of nondiscrimination and coverage test results;

* Any other plan-related materials, such as claims against the plan.

How long should they be kept?

Documents should be kept for six years after the date of the filing in which they relate. However, good business practices suggest certain records should be kept for the life of the plan, including all plan documents dating from its inception. Other records to be kept indefinitely include all documentation relating to benefit eligibility or amount of benefits paid and all records pertaining to employees' salary histories and hours worked.

The longer the paper trail, the easier it will be to respond to an inquiry from a government agency or a request for information from a plan participant. If records are lost, stolen or destroyed before the expiration of the six-year period, the employer will be required to recreate the records, unless to do so would result in excessive or unreasonable costs.

For other disclosure of participant benefits, the DOL can require the employer to reconstruct records, which could be very time consuming and, in some instances, impossible.

How should records be archived?

It is recommended records be kept in a manner providing easy retrieval. As part of emergency preparedness, records often are maintained at the employer and the service provider.

According to DOL regulations, electronic media may be used to comply with the retention requirements provided the following requirements are met:

* The system has reasonable controls to ensure the accuracy of the records;

* The system should be capable of indexing, retaining, preserving, retrieving and reproducing the electronic records.

* The electronic records can be readily converted into legible paper copies and

* The electronic recordkeeping system is not subject to restrictions that would inappropriately limit access to the records.

Most original paper records may be disposed of after they are transferred to an electronic recordkeeping system, provided the recordkeeping system complies with the above requirements. It is important to note that the original may not be discarded if it has legal significance or inherent value in its original form (e.g., notarized documents, insurance contacts, stock certificates, and documents executed under seal).