Clients often ask how long they must retain retirement plan records. ERISA requires plan sponsors to retain retirement plan records for a period of at least six years. This six-year period is measured from the filing date of the IRS Form 5500 creating the plan records. This means that plan sponsors should hold on to the Forms 5500 for at least six years from the filing date, along with all associated schedules, testing results, employee contribution and distribution activity, financial reports, audited financial statements and related documentation that would support positions taken on the return.
While ERISA requires retention of documents for at least six years, we recommend plan sponsors hold on to all participant level records indefinitely. According to the Department of Labor, participant records should be retained “as long as a possibility exists that they might be relevant to a determination of the benefit entitlement of a participant or beneficiary.” So when in doubt, retain all records reflecting participant information – date of hire, rehire, termination, eligibility, payroll records, participant deferral election forms, investment election change forms, beneficiary designation forms, distribution request forms, loan documents, rollover requests and QDRO requests. Other items to retain indefinitely include plan documents, amendments and trust agreement and records including investment statements, IRS determination letters, participant disclosures such as the Summary Plan Description, Summaries of Material Modification and Summary Annual Reports, blackout notices, QDIA notices, corporate actions, service agreements, collective bargaining agreements if applicable, fee disclosures and copies of the fiduciary Fidelity bond.
Properly retaining plan and participant data is an important box to check in the plan sponsor ERISA-fiduciary-duty column. Not only will potential civil penalties apply if plan records are not preserved, missing records can make it more difficult for a plan sponsor to defend plan operations or the accuracy of benefit payments in the event of an agency audit or plan participant challenge. There is a misperception that all records should be retained for six years, and we often see problems with plan sponsors failing to retain records long enough.