Consultant Gives Tips on Benefits Records Retention

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.

"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."

Records to Keep

Specifically, Cavanaugh recommends plan sponsors keep records that provide accurate details about the plan's activities, including:

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 is pending. 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 determinations. Plan distribution records, including Form 1099s. Corporate income tax returns (in order to reconcile deductions). Evidence of the plan's fidelity bond. 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.