Articles | June 13, 2022

Retirement Plan Record Retention: Keeping Your Data Clean

Maintaining a well-organized archive of your participants’ retirement records sounds easy in theory, but can be difficult in the real world. It’s easy to grow lax about keeping up with the deluge of data for which you’re responsible, but careless record retention will always come back to haunt you. Whether it’s the unnecessary and laborious administrative process needed to perform daily functions, a legal action, or a government audit, inaccurate data can cost you plenty. 

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Why plan sponsors need to stay on top of their participants’ retirement plan records

Inaccurate record keeping can drag down your organization in many ways, some more visible than others. A dramatic example of how missing or erroneous retirement data could hurt you would be if the Department of Labor or IRS audits your plan and finds you in violation of the Employee Retirement Income Security Act of 1974 (ERISA).

Failing a government audit can cost you thousands of dollars a day while you remain incompliant. However, faulty retirement data can also cost your organization in less visible ways that might go unaddressed for years. Missing or incorrect participant contact info, for example, can force your administrative staff to spend time tracking down former employees who are still legally entitled to receive plan information. Even worse, bad data might serve as the basis for decisions about benefit changes, which can add unnecessary expenses to the plan’s administration.

What documents you need to retain and for how long

“Data” and “records” are words that cover a broad range of documents and information, and the specifics of what you need to keep (and keep updated) depend on what type of plan you sponsor.

For instance, the IRS advises plan sponsors to retain “the plan and trust document, recent amendments, determination and approval letters, related annuity contracts and collective bargaining agreements.” The Department of Labor notes that plan sponsors should have the “SPD [Summary Plan Description], latest Form 5500, trust agreement, and other instruments under which the plan is established or operated.”

Again, the exact documents you need to retain depend on your specific plan. Further, while ERISA states that plan sponsors “shall keep such records available for examination for a period of not less than six years after the filing date of the documents,” it’s a good idea to retain these records for far longer.

What you can do to clean up your data

Maintaining retirement records can be challenging, but tackling the problem in a methodical way will help you stay compliant and up-to-date. A broad, three-step process to consider is:

  • Data taxonomy: This is where you take a long, hard look at your existing data and correct any inaccuracies or missing pieces.
  • New processes: Once you know you’re working with clean data, you’ll want to set up systems and processes that make sure new data entering your records is also accurate.
  • Heightened security: Conducting regular IT analyses and converting any paper records to digital will help keep confidential retirement plan information safe and secure.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

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