“How long does my client have to retain records associated with her 401(k) plan?”

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with a financial advisor from Texas is representative of a common inquiry related to a plan sponsor’s responsibility for record retention.

Highlights of the Discussion

In short, ERISA requires plan sponsors to retain plan-level records and reports, such as Form 5500 filings, for a period of six years after the filing date, and to keep participant-level records for an indefinite period of time. ERISA Sections 107 and 209 are the two primary sections of law that cover the record retention requirements for qualified retirement plans. Proper data retention will assist plan sponsors in meeting their fiduciary duties of ERISA.

 Records Plan-Level Participant Benefit
Authority ERISA Sec. 107 (see 1027) ERISA Sec. 209 (see 1059)
How long to keep Six years Indefinitely[1]
What to keep ·   Form 5500 filings

·   Associated schedules

·   Financial reports

·   Audited financial statements

·   Vouchers

·   Worksheets

·   Receipts

·   Resolutions

·   Date of hire, rehire or termination

·   Participant eligibility date

·   Participant compensation

·   Contribution election forms

·   Participant’s designated beneficiary

·   Records of any distributions requested by the participant

·   Qualified Domestic Relations Order

·   Plan loan documentation

Standard to Meet Supporting information and documentation that would permit a plan sponsor to verify, explain and clarify plan records to the DOL, and allow the DOL to check for accuracy and completeness Records sufficient to permit a plan sponsor to determine the benefits due or which may become due to plan participants. Failure to maintain required records for any plan year may result in a civil penalty of $10 for each employee with respect to whom such failure occurs.

[1] Proposed DOL Regulations 2530.209-2(d) 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.”

Plan sponsors can retain these records via electronic media if they satisfy the following requirements of final DOL regulations:

1. The electronic recordkeeping system has reasonable controls to ensure the integrity, accuracy, authenticity and reliability of the records kept in electronic form;

2. The electronic records are maintained in reasonable order and in a safe, accessible place and in such manner as they may be readily inspected or examined;

3. The electronic records are readily convertible into legible and readable paper copy as may be needed to satisfy reporting and disclosure requirements or any other obligation under Title 1 of ERISA;

4. The electronic recordkeeping system is not subject, in whole or in part, to any agreement or restriction that would directly or indirectly, compromise or limit a person’s ability to comply with any reporting and disclosure requirement or any other obligation under Title 1 of ERISA; and

5. Adequate records management practices are established and implemented.

Sponsors of qualified retirement plans may need to keep plan records longer than they may think. It is important to know the timelines in order to avoid potential penalties and fiduciary violations.