United States

Plan documents: Save or purge?


Many ERISA plan sponsors are unclear about the primary fiduciary responsibility for plan document retention (i.e., which documents may be purged, and when). Most plan sponsors assume a “reasonable” amount of time for retaining documents prior to purging them. Unfortunately, what plan sponsors consider “reasonable” may not comply with IRS rules.

The purpose of this communication is to underscore the importance of plan record retention so that you do not fall prey to the fiduciary breach described below.

Recently, a random IRS 401(k) plan investigation shed an uncomfortable light on the issue of plan document retention. When pressed to produce specific documents that were not readily available, the plan administrator decided to contact the plan’s service provider. The plan administrator was informed that the third-party administrator (TPA) purges its files after each plan restatement and expects the plan sponsor to meet any document retention obligations under IRS or ERISA. This is actually standard procedure for many TPAs.

Depending on the document category, the IRS has varying standards for how long documents need to be kept. For example, proposed Department of Labor (DOL) regulations issued in 1980 stated that participant benefit records must be retained “as long as a possibility exists that they might be relevant to a determination of the benefit entitlements of a participant or beneficiary.” While the regulations were never finalized, the DOL has taken the position that those record retention obligations became applicable upon the department’s initial issuance of proposed regulations under section 209—on Feb. 9, 1970—because employers were thereafter put on notice of the obligations. As such, plan sponsors should consider whether benefit plan records must be maintained indefinitely.

Record retention rules are accessible in both the DOL regulations and ERISA statutes. Statutes of limitations on plan sponsor liability for administrative functions concerning retirement plans also are codified.

Due to the length of regulations on this topic, we urge you to review the AICPA plan advisory for a thorough list of document retention regulations.

How does your retirement plan measure up?

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