Benefit Plan Policies: Records Retention and Destruction

Larry Beebe, CPA

In this series, we are reviewing the written plan policies needed to help your benefit plan stay compliant and operate most effectively. For a full list of the necessary policies and why your plan should implement them, click here.

Record retention policies have their foundation in the Enron scandal and its resulting fallout. When the investigation of Enron was made public, the company’s CPA firm, Arthur Andersen, shredded large amounts of relevant documents and e-mails. While there were a number of consequences of this scandal (including the dissolution of Arthur Andersen), one that affects benefits plans is the almost universal adoption of records retention and destruction policies.

Here are the main points your plan’s policy needs to address:

  • A statement detailing the purpose of the policy. A records retention and destruction policy should ensure the following actions regarding plan documents:
    • Proper maintenance
    • Disposed of in a logical manner
    • Stored in a safe environment
    • Available in the case of a federal investigation
  • A statement of what records are covered by the policy and how long those records should be kept.
  • Guidance as to when records can and should be destroyed. Retaining records beyond the required destruction date could be costly if copies are required to be produced for a lawsuit or a federal investigation.
  • Details on backup procedures, archiving requirements and check-ups on the reliability of the system.

Records retention must be taken seriously. If a federal investigation or audit occurs, and the required records are not available, your plan could incur severe civil and criminal penalties. There are also a number of ERISA requirements that specifically relate to the retention and destruction of retirement plan documents; if your plan is governed by ERISA, ensure that those are also addressed in your plan’s policy.

For additional information on employee benefit plan policies, please see the Trustee Handbook published by the International Foundation of Employee Benefit Plans.

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