Document Retention for ERISA Plan Sponsors

via Lockton Retirement Services Guidance

Plan sponsors are required to retain plan documents and other records related to benefits – but for how long? Unfortunately, there is no universal answer to this question because the applicable laws are confusing and contradictory.

ERISA has two provisions that concern record retention. First, ERISA §107 requires anyone who files or certifies certain information (i.e. a Form 5500) to maintain sufficient records to explain, corroborate, substantiate and clarify the information contained in the filing or certification. These records must be retained for six years from the date of filing. The second ERISA provision pertains to records necessary to determine a participant’s benefit. Specifically, ERISA §209 requires every employer to “maintain benefit records with respect to each of its employees sufficient to determine the benefits due or which may become due to such employees.” The proposed regulation explaining ERISA §209 went on to say that these records must be maintained for “as long as a possibility exists that they might be relevant to a determination of the benefit entitlement of a participant or beneficiary.” This means indefinitely, or forever.

To make matters more confusing, the government agencies regulating the ERISA rules all seem to have their own opinion. The Internal Revenue Service (IRS), Department of Labor (DOL) and Pension Benefit Guaranty Corporation (PBGC) all regulate retirement plans under no uniform retention period. The DOL and the PBGC require a six-year retention period from the audit or premium payment due date, while the IRS requires records to be kept for seven years after the applicable Form 5500 filing.

The icing on the cake is the limited case law suggesting that indefinite recordkeeping is in the best interest of plan sponsors. One of the most notable cases, Central Pension Fund of Int’l Union of Operating Engineers v. Ray Haluch Gravel Co., a 2012 case out of the 1st Circuit, found that an employer had not provided sufficient records to determine the amount of contributions owed to an employee. The question then became, who carries the burden of producing the records? Although plaintiffs traditionally carry the burden of proof, the Court found that evidence of the employee performing some work and the employer’s insufficient records was enough to shift the burden to the employer/defendant under ERISA §209. The indication here is indefinite/forever record retention will best serve to protect employers.

Although ERISA does not specify a penalty for failure to maintain records, the same civil and criminal penalties apply as with knowingly violating any other ERISA provision. While plan sponsors can alleviate some of this document retention headache by hiring a third-party administrator (TPA), hiring a TPA does not relieve sponsors of their fiduciary duties. Any outsourcing of document retention still likely leaves the fiduciary liability on the plan sponsor.

Our recommendation is to keep as many records as possible indefinitely, specific records certainly indefinitely, and all other pertinent plan records for a period of 7 years. With the advancement of technology, long-term retention of records has become less burdensome. To assist in the organization of how to classify your records for retention, we have prepared a Document Retention Guide offering guidance on the importance of each document listed and provide assistance in creating an organized and efficient recordkeeping system. This guide lists documents typically required to properly administer a qualified retirement plan that are often requested during the course of an ERISA lawsuit, or an IRS/DOL audit. While this guide may not include all documents necessary to properly administer a plan, any documents and records not listed in the guide could be requested during a dispute, audit or investigation. This chart also lists suggested retention periods for documents, which sets forth a minimum standard. As mentioned above, it may be in your best interest to keep documents indefinitely, or forever, in order to reduce the possibility that a record would be discarded in error.

About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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