Benefits and Compensation

For the Record, Meticulous Retention of Plan Documents Is Crucial

The Employee Retirement Income Security Act (ERISA) requires that every employer maintain sufficient records for each employee to be able to determine the benefits due to the employees now or in the future. The plan sponsor has responsibility for retaining retirement plan records even when a third-party administrator (TPA) is hired to provide recordkeeping and administrative services.

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Records may be requested at any time, to respond to queries related to daily operations, investments, plan features, or plan errors and corresponding corrections, as well as for audit purposes. In light of this, a primary responsibility for plan sponsors is giving appropriate attention to establishing and implementing the plan’s record retention requirements.

Let’s take a look at a few scenarios when review of the plan’s records will be necessary to resolve any disputes.


In the retirement plans community, a “plan record” is a general term used to cover the plan’s accounting, administrative, benefit determination, compliance, corrective, educational, financial, governing, investment, and reporting documents. It is prudent to look broadly at what constitutes a plan record to ensure that information that could be requested is not inadvertently destroyed.

The time span required for maintaining documents and data seems equally long, whether it comes to records that are needed to determine a participant’s benefit, or in some cases to prove that a former employee is not entitled to a benefit. In both cases it basically seems that the records need to be maintained indefinitely.

Reporting Documents

A common inquiry for plan administrators involves the potential benefit letter sent from the Social Security Administration that informs an individual that he or she may have a benefit under a particular plan. The letter, sent when an individual files a claim for Social Security benefits, lists the name of the plan that previously reported this individual to the Internal Revenue Service (IRS) on Form 8955-SSA as an employee who separated from employment with a deferred benefit under the plan, or on Form 1099 as an employee who took a plan distribution.

Receipt of the letter results in a call or letter to the listed plan’s sponsor, where the amount of benefit due is provided in response, if known. If not, research into historical records is required before the administrator of the plan can report whether the benefit has been paid out, leaving no further benefit due, or whether a benefit is still owed the inquiring former employee.

Corrective Documents

Another common occurrence is discovering a plan error, making it necessary to review plan records from the applicable period. Most recordkeepers house a limited amount (for example, two years) of data for plan clients and their participants online, for ease of access to this information. However, when a few years pass before the error is discovered, the process for and ease of getting ahold of historical plan records become good indicators of the strength of the plan’s internal controls—and, more commonly, the TPA’s controls.

It is important to remember that changing a TPA involves moving plan records from one recordkeeper to another. During the transition, both teams must ensure that all relevant, stored records are accounted for by the prior and new administrators. It is also advisable to make sure that the transferred records are uploaded appropriately and retrievable by date, transaction, and employee. The records should be printable as a readable paper document, when this is required. In some instances, it may be necessary to piece together the records with information from more than one recordkeeper, as when a distribution check sent to a former employee at an incorrect address is returned uncashed and a federal agency auditor is looking at plan records.

The delayed discovery of an error will likely bring into play a prior version of the plan, before the most recent amendments or restatements. This means that maintaining prior versions of the plan, summary plan description (SPD), summary of material modifications (SMM), and related participant communications is essential to establishing the applicable terms at a particular point in time for plan-defense purposes. When the provisions of the plan have been modified, documentation of the dates and authorization for such changes may come under review.

Investment Documents

Another possible scenario that may require a review of historical plan records comes when participants file a lawsuit against the plan and plan sponsor, claiming that the expenses paid for designated plan investments are excessive. Here the plan sponsor will need to produce and review the records related to investment, as well as investment provider fees and expenses. In addition, the case review may require a look at the plan’s investment committee meeting minutes to assess whether the investment menu review and decision making were done in a prudent manner.

It is expected that the meeting minutes will disclose whether a consultant was engaged in the process, what benchmarking and investment comparisons were performed, and whether a particular investment is in line with the plan’s overall investment goals. Recent case rulings in this realm have considered whether the plan fiduciary inquired about lower-cost investment alternatives, especially when the amount invested warrants an available threshold reduction. This fee reduction occurs when plan assets grow to the point where the plan may qualify for preferential treatment and lower fees from service providers, a point that plan fiduciaries must monitor for potential savings for the plan and its participants.

Related fee information may be found in the plan’s ERISA Section 408(b)(2) disclosure notice, and the committee minutes should reflect receipt and review of the notice by the committee. The notice will discuss investment provider fees and investment expenses, and outline fees that apply to certain plan features that a participant may use, such as processing fees for plan loans and qualified domestic relations order (QDRO) reviews. The minutes may include notes related to the use of technology to reduce administrative costs, for example, or the availability of lower fees for online applications. The minutes also may discuss any current services not being used, or new service offerings being introduced.

More information relevant to lawsuit discovery and records retention also may be described in the plan’s investment policy statement (IPS) and annual ERISA Section 404(c) compliance review. The IPS is a document designed to guide the plan’s investment decisions, and should be adhered to when making them. It’s necessary to update it when the plan’s investment goals change or, at a minimum, periodically.

Similarly, the Section 404(c) review will outline steps taken by the plan administrator to satisfy the requirements for ensuring that participants have sufficient information to make informed investment decisions.

Best Practices

Here are a few best practices for structuring record-retention procedures:

  • Prepare written record-retention requirements and distribute them to the internal and external teams involved in your plan administration. Update the requirements when any gaps are discovered.
  • Create a paper file and online repository for plan documents, including any amendments, SPDs, and SMMs. Arrange the documents by effective date.
  • Establish a file for annual plan accounting records for contributions, distributions, adjustments, fees, and expenses, along with annual audit results, reports, and financial statements.
  • Confirm the ability to gain access to plan census information that includes participant demographic, employment, and balance information.
  • Maintain the plan’s current and previous procedural documents, likely prepared by the TPA providing services to the plan.
  • Create online files of all participant communications, which will include required disclosures, required notices, and educational materials.
  • Create a paper file and online repository for the plan committee’s meeting minutes, along with any investment performance reports, consultant presentations, and related materials presented to the committee.

Final Thoughts

While some plan sponsors and administrators attempt to rank which plan records are most important, suffice it to say that all records matter. It is critical that plan sponsors be able to produce requested documents during an IRS audit or U.S. Department of Labor (DOL) investigation, and that retrieval of these plan records can be done in a timely matter because both agencies set a deadline for delivery.

Record retention and retrieval is an ongoing process, one that should be reviewed periodically to ensure strong controls.

Arris Reddick MurphyArris Reddick Murphy is an attorney with experience in the employee benefits and executive compensation practice area, and she is senior counsel with FedEx Corp.’s Tax & Employee Benefits Law group. Before joining FedEx, she held the position of associate with the law firm of Potter Anderson & Corroon, LLP, and worked in-house with The Vanguard Group and the City of Philadelphia as counsel to its Board of Pensions and Retirement. She is contributing editor of The 401(k) Handbook.

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