Document Retention Recommendations For Retirement Plan Sponsors
You’ve sponsored a retirement plan for years, which means you’ve probably been collecting a ton of paper over the years. At some point you will find yourself asking how long these documents, papers and forms have to be kept anyway?! Well, per ERISA Section 107, plan administrators are required to keep all necessary reporting and disclosure documentation for a period of six years after the filing date. But that’s not all. ERISA Section 209 requires employers to retain records related to benefit plan determination indefinitely. Employee plans cover the qualification of pension, annuity, profit sharing and stock bonus plans, IRAs, SEPs, SIMPLEs, tax- sheltered annuities and 457 plans. Let’s dig a little deeper.
Document Retention Under ERISA Section 107
The following reporting and disclosure records used to support filings should be retained at least six years after the Tax Form 5500 filing date include, but are not limited to:
- Form 5500, including all required schedules and attachments
- All financial reports and supporting documentation
- Audited financial reports
- Determination letter applications and IRS determination letters
- Required employee communications
- Actuarial statements and valuations
- Nondiscrimination and coverage testing
- Proof of fidelity bond coverage
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Document Retention Under ERISA Section 209
The following benefit determination records that should be retained indefinitely include, but are not limited to:
- Plan documents and all related items
- Census documents and all related supporting items used to determine eligibility, vesting and benefits
- Participant account records and actuarial benefit analysis (dates of hire, termination eligibility date, compensation, contribution election forms, etc.)
- Trust documents
- Beneficiary designations or qualified domestic relations order
- Plan distribution, loan and withdrawal records
The Risk
Failure to retain required records for any plan year could result in a civil penalty of $10 for each employee affected when such a failure occurs, unless it is shown the failure is due to reasonable cause.
Ready To Go Digital?
Converting your records to a digital format is a great way to clear some space in your file cabinet. Just remember that additional rules apply if you decide to take this route. As plan sponsor, you are able to maintain electronic records as long as these conditions are met:
- The electronic system has reasonable controls to ensure integrity, authenticity, accuracy and reliability of the records.
- The records are stored in a reasonable and safe place that is accessible so they may be readily reviewed or inspected.
- They must be convertible into a readable hardcopy in order to satisfy the reporting and disclosure requirements of Title 1 of ERISA. The recordkeeping system must not compromise the plan sponsor’s ability to comply with the above requirements.
- The records must be properly managed. Acceptable record management practices must be established and maintained.
Document Retention In A Nutshell
So, back to the question at hand, how long? Depending on the type of record, it could be indefinitely. The other question at hand is how to keep these documents? Physical storage can be cumbersome and expensive; so electronic storage is a popular option for some or all of their plan records. Though there aren’t any absolute restrictions for maintaining electronic records, there are a few things to consider.
First, keep your records easily accessible. Unreasonable delays in retrieving information can have a negative impact if a disgruntled employee is requesting the documents. Also, records that have distinguishing marks like a notary seal should be kept in hard copy form unless the electronic medium can clearly reproduce the mark.
Regardless of how you maintain your records – don’t forget the importance of security. Plan records include everything an identify thief needs; so ensure your storage method is secure.
By Darlene Finzer, CPA, QKA, CSA (New Philadelphia)
Check out these articles for more great insight to help you master your retirement plan sponsorship responsibilities:
Room For Growth: How To Get To The Top Of Your Fiduciary Game
Sacerdote v. N.Y. University: A Cautionary Tale To Plan Fiduciaries