Retirement Plan Record Retention Guidelines

Monday, November 26, 2012

Plan sponsor’s often ask “How Long Should Retirement Plan Records be Retained”? That is a very good question and the answer depends on the specific document in question.

Maintaining a retirement plan provides some great tax deferral opportunities but comes with significant responsibility as far as document compliance, annual testing and record keeping is concerned. Administrative Retirement Services, Inc. believes that if the plan sponsor is careful in selecting a quality Third Party Administrator (TPA) and investment company, then the plan can operate successfully. Quality service providers are not always the least expensive, but when was the last time you asked your doctor how much a procedure cost? Retirement plan assets represent the second largest investment of most employees. Plan fiduciaries are required under ERISA to act prudently and a prudent man would only use quality service providers. It is the responsibility of the plan sponsor to select the right service providers.

In order to have a qualified plan, the plan sponsor is required to have a written plan document. Many plan documents have been amended to bring them up to current Internal Revenue Service (IRS) requirements. Currently the IRS requires prototype plans to be restated every six years, with the next restatement period beginning in 2014. Recently the IRS has required annual Interim amendments, which annually bring the plan into compliance with current IRS requirements. Plan document and amendment requirements have become very complex.

In addition to having a written plan, the plan sponsor has to communicate the plan provisions to the participants through Summary Plan Descriptions and Summary Material Modifications. Plan Sponsors also have to document elections from participants such as contribution percentages, investment elections and beneficiary in the case of death.

Annually, a plan sponsor only retains a qualified status if the plan complies with current tax laws and pass all necessary tests, including but not limited to contributions limits, discrimination and coverage testing. The plan must be operated according to the plan documents and all of these items listed so far must be able to be substantiated to the IRS or the Department of Labor should they decide to randomly select the plan for audit.

A good Third Party Administrator (TPA) and investment company will have all of their records in a format that allows for quick and easy retrieval. ERISA requires records to be retained for six years. However, records used to determine the benefits due to employees must be retained until after the employee withdraws their benefit. Based on these requirements, below are some guidelines.

Retirement Plan Record Retention Guidelines

Plan Documents - including Basic Plan
Document, Adoption Agreement,
Amendments, Summary Plan Descriptions,
and Summary of Material Modifications.
For the life of the plan and for six years after
the plan has terminated.
Participant Records - including beneficiary,
distribution, enrollment, investment forms
and investment statements with participants
account balance and activity
At least six years after the participant's
complete withdrawal from the plan.
Administrative Reports - including annual
census data, contribution calculations & plan
For the life of the plan and for six years after
the plan has terminated.
Federal Forms - including Form 5500 and
related schedules, SSA-8955, 5330
1096, 1099-R & Summary Annual Reports.
For six years.

A best practice is to always retain signed copies of all documents and amendments.

If you have any questions about retirement plan record retention, contact Administrative Retirement Services, Inc.