ERISA Record Retention: What Every Plan Sponsor Needs to Know

Missing ERISA plan documents can significantly increase costs and long-term risk for employers and plan sponsors. For example, a former employee or their heirs may file a claim for benefits they mistakenly believe are due. Here, the burden falls on the plan to provide records that prove the distribution was previously made to the employee — sometimes decades ago — or pay the claim. This scenario highlights the critical role of records retention policies. 

Plan sponsors and other fiduciaries must understand their roles in preserving and maintaining plan records that help avoid duplicate distributions and ensure compliance with their fiduciary obligations. And, given that retirement plans are long-term commitments spanning many years of a participant’s work life, they inevitably generate extensive supporting documentation for plan sponsors to store and manage.

Read on to learn more about ERISA plan records retention guidelines, unusual circumstances that may complicate the plan sponsor’s role, and best practices for preserving and maintaining crucial records. 

What Rules Apply to ERISA Records Retention?

Plan sponsors adhere to specific rules pertaining to record retention but may overlook some significant nuances. The following rules apply:

• ERISA Section 107 requires that plans retain records in an easily accessible format for six (6) years from the date of filing (including supporting documentation).
• The IRS requires most ERISA plans to keep records for three (3) years from the plan’s Form 5500 filing date. 

However, ERISA Section 209 provides a more rigorous guideline, one that is key but often overlooked: Plan sponsors must keep plan records until all benefits have been paid out and the time for auditing the plan has passed. It is the plan sponsor’s responsibility to demonstrate that all due benefits have been paid to employees, as the burden of proof lies with them.

What Is Form 8955-SSA, and Why the Urgency?

Plan sponsors send a Form 8955-SSA to the Social Security Administration (SSA) when an employee leaves a job without taking their vested ERISA retirement plan benefit. When the employee reaches the plan’s normal retirement age (typically 65), sometimes decades after they accrued that benefit, the SSA will notify the employee that benefits may be available based on the Form 8955-SSA. The employee can then approach their former employer with a government letter indicating that money may be owed to them. The plan sponsor must then review plan records to answer the claim and pay the benefits unless the employer can prove that the money was already distributed.

The rules surrounding record retention and Form 8955-SSA have not changed; the circumstances have. An upcoming wave of baby boomer retirements could trigger a corresponding rise in benefit claims, leaving plan sponsors searching for records that may no longer exist. 

Who Is Responsible for Maintaining ERISA Benefit Plan Records? 

The responsibility for maintaining all plan records falls on the plan sponsor, whether the employer or a third-party administrator (TPA) stores them. Records of plan distributions may be the first line of defense against claims for benefits, but the following types of documents should also be kept for future reference:

Keeping track of records for decades remains a challenge for plan sponsors, especially considering common business events such as: 

Implementation of standard record retention policies

Most companies develop record retention policies, and employees may follow them with the best of intentions. But, as noted above, ERISA benefit plan records need special handling and longer storage. Companies may unintentionally destroy the records needed to prove length of service, benefits accrued, and benefits paid from retirement plans to employees. Fixing this problem could be as simple as amending standard record retention policies to include specific guidance for benefit plan records.

Execution of business transactions such as sales, M&As, and closures

Due diligence should reveal ERISA benefit plans that pass from company to company during transactions and should be addressed. Occasionally, plan details don’t make it into the contracts, but it is more likely for records to be lost or destroyed after the transaction closes. These situations do not absolve the plan sponsor of its responsibility to retain plan records.

Termination of TPA contracts

Employers may transfer their business from one TPA to another or the provider may go out of business; either situation leaves the plan records vulnerable to loss or destruction. Unless the contract contained specific language regarding storage of the plan’s records, the TPA is not  required to continue holding plan records. Here, again, the plan sponsor is responsible for the records whether they are housed with a TPA or with the employer’s HR department. 

Protection of data

System migrations and conversions controlled by the employer, TPA, or other entity can result in data loss. Whether records were destroyed because an employee zealously followed the company’s record retention policy or were lost due to a glitch in an IT system is generally immaterial. As noted above, if the employer cannot prove that benefits were paid to a participant, the employer may have to pay even if it believes benefits were already distributed (including if the benefits were earned while the individual was employed at a previous entity that was acquired by the current plan sponsor). 

Records Retention Is an Ongoing Process

Will a comprehensive review of your plan’s recordkeeping reveal missing documents or gaps in your retention protocols? Please consider asking our Employee Benefit Plan Audit team to review your plan and offer advice on how to improve your plan’s record management.