In our 401(k) and 403(b) Rescue Series, we discuss how many of the common errors found in these plan types could be prevented by maintaining complete, accurate plan records. These records are necessary in determining participant benefits and crucial if the plan is audited or a claim arises regarding plan operation or compliance. While the legal requirements for record retention have remained consistent, guidance has evolved to reflect modern storage technologies. Plan Sponsors now have greater flexibility in how records are retained, provided they are accurate, accessible, and secure.

Maintaining Plan Records

Plan Sponsors are legally required to maintain employee benefit plan records. These records should include, but are not limited to:

• Signed, Original Plan Documents and Amendments
• Determination and Opinion Letters
• Participant Notices, including delivery method and date of delivery
• Participant information such as census data, election forms, loan documentation, distributions, etc.
• Recordkeeping and Valuation Reports
• Form 5500 Filings, including all schedules and attachments
• Any records supporting nondiscrimination testing, compliance procedures, fiduciary decisions, and participant communications

Requirements Under ERISA

Two sections of the Employee Retirement Income Security Act (ERISA) specifically address record retention:

• Section 107: Requires anyone who is required to file an employee benefit plan report, such as Form 5500, to maintain all records necessary to verify the filing for at least six years after the filing date.
• Section 209: Imposes an additional obligation, requiring that employee benefit plan records be retained for as long as necessary to properly determine benefits that are or may be due to each employee. Though somewhat vague, the Department of Labor (DOL) interpreted this in 1980 to mean that records should be retained as long as there is a possibility they could be relevant to determining the benefit entitlements of a participant or beneficiary. In practice, this often means maintaining participant-level records indefinitely, especially for terminated employees who have not taken full distributions.

IRS Statute of Limitations

The IRS statute of limitations is typically three years from the filing date of Form 5500, meaning the plan could be audited regarding that information for up to three years. However, if pertinent information was not disclosed on Form 5500, the plan may be audited for up to six years. For certain failures involving fraud or substantial understatements, the statute of limitations may be extended to six years or longer.

Storage Solutions

Given the volume of information that must be maintained, Plan Sponsors may choose electronic storage solutions. However, they should consider the following:

• Security: Records contain highly sensitive information, including Social Security numbers, birth dates, and home addresses. Information security should be a top priority.
• Technology: Technology evolves rapidly, so it is essential to regularly update electronic storage and record retention policies to ensure proper maintenance of records.
• Original Documents: Some records, such as signed plan documents, may now be retained electronically under IRS guidance, provided the system ensures document integrity and retrievability. Wet signatures are not required unless otherwise specified by legal or contractual obligations. The DOL allows electronic recordkeeping if the records are accessible, convertible into paper form, and adequately protected against loss or tampering.

For Assistance with Maintaining Plan Records

If you need help, contact Ekon Benefits at (314) 367-6555 or info@ekonbenefits.com.

Straight From the Source

This summary reflects current IRS and DOL guidance, including ERISA Sections 107 and 209, and best practices under EPCRS Rev. Proc. 2021-30.