Who’s Responsible for Keeping Retirement Plan Records?

Who’s ultimately responsible for retention of retirement plan records: the sponsor, or the participant?

It’s an interesting conundrum. In a recent case, the 9th U.S. Circuit Court of Appeals found that the retirement plan sponsor — who was the defendant in the case — was the party responsible for keeping accurate records. Specifically, from the opinion summary: “the court held that where a claimant has made a prima facie case that he is entitled to a pension benefit but lacks access to the key information about corporate structure or hours worked needed to substantiate his claim and the defendant controls such information, the burden shifts to the defendant to produce this information.”

This article by Mary B. Andersen, CEBS, ERPA, QPA, from the Pension Plan Fix-It Handbook summed up the details of the case. In Estate of Barton v. ADT Sec. Servs. Pension Plan, Bruce Barton, now deceased, worked for ADT for 19 years. He left the company in 1986. Barton called the pension plan’s recordkeeper about his retirement benefits in 2010, when he turned 65. ADT’s administrator couldn’t find a record of his employment, and told him to file a pension benefits claim. Barton sent the requested information, but was then told he hadn’t proven he had a vested benefit.

Barton’s next step was filing a claim with the Employee Benefits Committee. In so doing, he cited that two other former ADT employees had received a pension benefit after providing similar information, which included W-2s and paystubs from specific years that listed ADT as his employer, along with other forms of employment verification, such as a service letter from management and copies of ADT employment ID cards. He provided other documentation as well. In the end, the committee denied his claim because “there were “no Plan records indicating [his] eligibility for participation in the Plan or [his] eligibility for benefits under the Plan.”

Barton filed suit in a California U.S. District Court, which upheld the committee’s decision. He then appealed to the 9th Circuit. Ultimately, the decision came down to which party has responsibility for keeping plan eligibility, participation and vesting records — the plan sponsor or the participant. The district court put the burden of proof on Barton, while the appellate court found that the employer was in a better position to provide the necessary records to prove benefit entitlement. The 9th Circuit Court remanded the case back to the District Court.

Again, from the opinion summary: “The district court correctly held that to recover statutory penalties based on a plan administrator’s refusal to comply with ERISA’s disclosure obligations, a plaintiff must qualify as a plan participant. The court reversed and remanded for the district court to apply the now-clarified burden of proof in this case.”

The bottom line? The long-term nature of retirement plans means their complex records typically span several years, possibly decades. So those records need to be kept for a  very long time. From Andersen’s article:

“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.”

In short, plan sponsors should work with their actuaries and plan record keepers to ensure their retirement plan data is organized, accurate and up to date for current plans and any acquired plans. Having clean records will help make everyone’s lives easier when proof of participant eligibility for benefits is in question, whether from a participant seeking pension benefits, or in a court of law.

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