Recently I was faced with a problem where a participant made an appeal of a retirement benefit determination. Factually, he had left employment with the company back in 1995, but his old employer had gone through 3 acquisitions and the new company had no idea what he was asking about. As we worked through the issue, it struck me that sometimes plan sponsors overlook a couple of the key recordkeeping requirements of ERISA so I thought I might address a couple.
Under ERISA Section 107, general plan records must be maintained for at least six years from the date the associated Form 5500 is filed. Depending on extensions for filing and additional time built in for safe compliance, most practitioners suggest retaining plan financial information for 7 or 8 years at least. Depending on the applicable statute of limitations for the state in which the plan resides, you may want to keep them for a longer period just to make sure you have them available if litigation is commenced. It is also important to remember that this obligation applies even when a Form 5500 is not required because of an exemption such as for certain small plans with under 100 participants.
Things are a little different in Section 209, which provides that an employer must “maintain benefit records with respect to each of [its] employees sufficient to determine the benefits due or which may become due to such employees.” The DOL has opined that this open-ended retention obligation suggests that records necessary to adjudicates claims must be maintained for “as long as they may be relevant to a determination of benefit entitlements.” For welfare plans, that might be less than the 7 or 8 years for plan documents, but you can imagine that for retirement plans, the obligation to retain individual records can well exceed the 6 years of Section 107.
With the advent of advanced data storage techniques, it is now certainly easier to retain records in an electronic format but some old claims data and plan records that exist only in paper files is probably hiding offsite in storage somewhere. Plan sponsors should give serious consideration to preserving that data in an electronic form before destroying any hard file materials. Preserving payroll records from 1994 may not seem like a good use of company resources, but if it is necessary to resolve a pension plan appeal, it is exactly the kind of thing Section 209 envisions being available for review.
Also, in a merge or acquisition where an employee benefit plan is involved, the due diligence done by the acquiring company should include a checklist of relevant plan information necessary for continued administration of the plan. This would include things like copies of past summary plan descriptions, plan documents, benefit statements and annual filings. Depending on how benefits are calculated, this might also include old payroll data. DOL and EBSA audits typically ask for plan data going back at least 3 years so don’t rely on representations that the plans are properly maintained. Make sure plan documents and records actually exist and can be retrieved if necessary. Of course there are penalties for failing to maintain sufficient records, so before disposing of those old boxes of plan information, check to make sure you will in fact never actually need them in the future.