If you've been around
the benefits world for a while, you probably remember the Paperwork Reduction
Act. And if you take a good look around your office, you might get a chuckle
out of the reams of records stored all around you.
Do you really need
to keep all those records? Amy Cavanaugh, an employee benefits consultant at
the Albany, N.Y., office of Milliman & Robertson, says yes - but not forever.
Her 20 years in benefits has given her a firm grasp on what to keep, and how
long to keep it.
years best bet
just how long should you keep your plan's records? According to Milliman
& Robertson consultant Amy Cavanaugh, the answer is six years.
records in support of a plan's annual reporting and disclosure generally
must be retained for six years after the documents to which they relate
are filed with the applicable governmental agency," she wrote in
a recent issue of M&R's Perspectives. If, in that time, records are
lost, stolen, or somehow destroyed, the sponsor is obligated to reconstruct
the records. If that can't be done, or can be done only at an unreasonable
cost, sponsors are required to keep whatever documents could be used to
reconstruct the records until the six-year period has expired.
six-year time frame also applies to plans covered by the Pension Benefit
Guaranty Corporation (PBGC). PBGC requires sponsors to keep records supporting
premium payments for six years after the premium due date. Required records
include census data proving participation (and nonparticipation) and any
information about the under funding of the plan.
"It's critical that plan sponsors
keep complete and accurate records," says Cavanaugh. The Internal Revenue
Service (IRS) and the Department of Labor both maintain active field audit staff
who may audit your plan to ensure that deductions are proper and that participants
are treated fairly.
Because many plan sponsors hire
outside administrators to handle the plan's day-to-day functions, Cavanaugh
cautions: Keep records yourself. "Oftentimes, the plan sponsor just assumes
that (the paid administrator is) keeping records, but it's really the plan sponsor's
obligation to have those records available."
Specifically, Cavanaugh recommends
plan sponsors keep records that provide accurate details about the plan's activities,
- The plan document, properly
dated and signed, along with any corporate action taken to adopt the plan
and all dated and signed plan amendments. Make sure the dates and signatures
are easily visible.
- Copies of all corporate actions
and administrative committee actions relating to the plan.
- Copies of all communications
to employees. These include Summary Plan Descriptions, Summaries of Material
Modifications, and anything else describing the plan that is provided to participants
or beneficiaries. Remember to include copies of videos, slides, and e-mails.
- A copy of the most recent determination
letter from the IRS, or the form to request that determination letter if one
- All financial reports, including
Trustees' reports, journals, ledgers, certified audits, investment analyses,
balance sheets, and income and expense statements.
- Copies of Form 5500.
- Payroll records used to determine
eligibility and contributions including details supporting any exclusions
from participation. It is critical that sponsors keep complete census data,
not just data on those who are eligible.
- Hours of service and vesting
- Plan distribution records, including
- Corporate income tax returns
(to reconcile deductions).
- Evidence of the plan's fidelity
- Documentation supporting the
trust's ownership of the plan's assets.
- Copies of all documents relating
to plan loans, withdrawals, and distributions. Include copies of spousal consents.
- Copies of nondiscrimination and
coverage test results.
- Any other plan-related materials,
such as claims against the plan.