How long should employers sponsoring a retirement plan retain records of benefits owed to employees? Record retention can become a complex issue over the passage of time. Now, the answer may change based on a recent ruling from a federal appeals court that shifted the burden of proof to the employers who are deemed to be in a better position to retain the records.
An employee of a companied who had resigned 24 years prior filed for benefits under his former employer’s DB plan. The company had been acquired and, because they did not have any records of the plaintiff’s employment, they denied the claim which was upheld by the district court. On appeal, the federal court held that the burden of proof shifts to the employer when the employee has a prima facie case because the records are within the employer’s control.
So how long is enough? According to an article in Thompson’s “Pension Plan Fix-it Handbook”:
The IRS and federal tax regulations require that records be retained as long as their contents may become material in the administration of any internal revenue law. As a result, records for retirement plans should be kept until all benefits have been paid, the trust has been dissolved and sufficient time has passed that the plan will not be the subject of an audit.
Employers cannot rely on their own internal rules of how long records should be retained. In today’s digital age, record retention is not difficult but it can be tricky if plan sponsors rely on their record keeper or TPA to keep those records, which is very common. What happens when that provider goes out of business or is acquired which is more common these days? And what happens when a plan switches record keepers or TPAs? Try going back to the company you dumped to get information on a timely basis.
