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Employee Benefit Plan Record Retention
By: Jeff Ronsse
Jeff Ronsse
Senior Manager
Manufacturing & Distribution
Tulsa
918.584.2900
Is your company complying with Employee Retirement Income Security Act of 1974 (ERISA) record retention regulations? Employers or plan sponsors alleviate some challenges of maintaining an employee benefit plan by hiring a third-party administrator. However, plan sponsors are not relieved of their fiduciary duty by hiring a third-party administrator. As employers and third-party administrators have moved to more electronic systems over the past decade, rules related to record retention have not changed. The current applicable regulations are as follows:
ERISA § 107.1027. Retention of records
Every person subject to a requirement to file any report or to certify any information therefor under this subchapter or who would be subject to such a requirement but for an exemption or simplified reporting requirement under section 1024(a)(2) or (3) of this title shall maintain records on the matters of which disclosure is required which will provide in sufficient detail the necessary basic information and data from which the documents thus required may be verified, explained, or clarified, and checked for accuracy and completeness, and shall include vouchers, worksheets, receipts, and applicable resolutions, and shall keep such records available for examination for a period of not less than six years after the filing date of the documents based on the information which they contain, or six years after the date on which such documents would have been filed but for an exemption or simplified reporting requirement under section 1024(a)(2) or (3) of this title.
ERISA § 2520.107-1 further discusses use of electronic media for maintenance and retention of records. To summarize this section, electronic recordkeeping systems must have reasonable controls to ensure the integrity, accuracy, authenticity and reliability of the records kept in electric form.
In simple terms, records should be maintained for six years after reports are filed and, if maintained electronically, should be the same quality as paper documents. While this might appear easy, many plan sponsors are finding that records might not be well maintained due to:
- Poor internal procedures
- Changes in third-party administrators
- Poor conversion from paper to electronic records
- Merging of acquired entities plans
ERISA also has specific record-keeping requirements at the individual participant level. The current applicable regulation is as follows:
ERISA §209.1059. Recordkeeping and reporting requirements
(a)(1) Except as provided by paragraph (2) every employer shall, in accordance with regulations prescribed by the Secretary, maintain records with respect to each of his employees sufficient to determine the benefits due or which may become due to such employees … If any person who is required, under subsection(a) of this section, to furnish information or maintain records for any plan year fails to comply with such requirement, he shall pay to the Secretary a civil penalty of $10 for each employee with respect to whom such failure occurs, unless it is shown that such failure is due to reasonable cause.
On the surface, these regulations appear straightforward, but the regulations do not specify a time period. In many cases, benefits might not be due to a participant for 20, 30, 40 or even 50 years. This creates enormous burdens on the plan sponsor for proper record retention and accessibility in the future.
To evaluate whether your company complies with ERISA record retention regulations, consider the following:
- Clarify existing company retention guidelines and compare the company retention guidelines to ERISA guidelines.
- Assess the state of your current plan records, i.e., paper, electronic, history.
- If records are electronic, determine if files are accessible and properly indexed.
- Determine whether future technology upgrades will affect record accessibility.
- When acquiring entities, perform due diligence on plan records.
If you have question regarding these regulations, contact your BKD advisor.
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