A new Ninth Circuit Court of Appeal ruling highlights recordkeeping requirements for employee benefit plans under ERISA, the federal law regulating benefit plans, and the con-sequences for employers who don’t follow these rules.
Workers Question Plan Records
William Shaver and William Dereschuk, members of the Operating Engineers Union, Local 428, had concerns about the management of their pension fund. Over a decade, the plan’s trustees listed more than $1.6 million in unitemized expenses on Schedule C of the fund’s annual Form 5500 report. Shaver and Dereschuk repeatedly requested more detailed information on how this money was being spent, but the trustees declined to provide it.
Shaver and Dereschuk sued the trustees for neglecting to maintain adequate financial records. The workers claimed that even though it was permissible to aggregate fund expenses on Form 5500, ERISA required the trustees to keep adequate records to back up these expenses. The workers requested the court remove the trustees or order them to keep better records. The trustees argued the workers had no claim because they didn’t allege they suffered any damage from the recordkeeping problems.
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ERISA Recordkeeping Rules Enforced
The Ninth Circuit, which covers California, has now ruled the workers’ recordkeeping claim can go forward. Under ERISA, certain employee benefit plans such as this one must file an annual Form 5500 report, including details of revenues and expenses. Further, the plan’s trustees must keep adequate records so information in the report can be verified. Not keeping these records amounts to a violation of ERISA. The court said this is true, even if, as in this case, the ERISA violation doesn’t cause a loss.
Recordkeeping Guidelines
This ruling demonstrates that failure to keep adequate ERISA records can lead to time-consuming and costly lawsuits. ERISA requires the plan administrator to maintain records-such as vouchers, worksheets, receipts, and applicable resolutions-that allow Form 5500 information to be verified, explained, clarified, or checked for accuracy. These records must be maintained for six years after the report is filed. Even if a benefit plan is exempt from the Form 5500 filing requirement because it has fewer than 100 participants, the plan still must maintain records substantiating information that would have been provided had a Form 5500 been filed.