Record Retention Requirements & Considerations

Issue Date: July 17, 2020

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Introduction

Employers often ask, “How long should I retain my employee benefits–related records?” It comes as no surprise that there is not an easy answer to this question because of the applicability of different laws, regulations, and situations specific to a particular business. For example, depending on the type of records being retained, ERISA, the ACA, and the Internal Revenue Code all impose specified record retention requirements. In addition, states may also impose document retention standards. Finally, having records necessary to defend the employer in the event of a lawsuit must also be considered.

Very few employers are going to align record-keeping procedures specifically with each existing requirement. Rather, most will create an easier-to-administer approach that maintains most records for a minimum specified period. Understanding the details of certain requirements will help employers better design an approach that is manageable and that minimizes risk to the employer.

Guidelines & Recommendations

A common guideline espoused by many advisors is to retain most employee benefits records for at least seven (7) years. However, due to the variety of ways in which deadlines are defined, we believe a more conservative eight (8)-year retention policy should be sufficient for most employee benefit records. However, there are reasons an employer may want to retain some records longer.

To help an employer decide what is works best for their situation, the following list includes examples of specific record-keeping requirements applicable to employee benefit plans.

 Record Retention RequirementsPossible “Rule of Thumb” and other Considerations
ERISA Record-Retention RulesERISA §107 requires plan records to be available for examination for not less than six (6) years after the filing date of the Form 5500 that is based on those records.Employers may want to retain employee welfare benefit plans records for up to eight (8) years. This accommodates extended Form 5500 filings (which may be made up to 9.5 months after the end of the plan year) plus a small cushion of additional time.  
ERISA Benefits–Related Legal Claims  ERISA does not provide a specific statute of limitations for benefit claims, so courts typically apply the most analogous statute of limitations for a state-law claim.   Note that an ERISA plan may be able to adopt a uniform limitation period to avoid state-to-state variations. The U.S. Supreme Court has ruled that an ERISA plan’s stated deadline for bringing a lawsuit controls unless it is unreasonable.For benefits subject to ERISA, employers should recognize the importance of plan document language related to deadlines for filing a benefits-related lawsuit.
ERISA Fiduciary ViolationsERISA contains a statutory limitations period for the filing of fiduciary actions:

Six (6) years after the date of the last action that constituted a part of the alleged violation or, in the case of an omission, the last date on which the fiduciary could have cured the breach or violation; or

Three (3) years after the earliest date on which the claimant had actual knowledge of the breach or violation, except that, in the case of fraud or concealment, the action may be commenced not later than six (6) years after the date of discovery of the breach or omission.
 
Internal Revenue CodeThe Code has a general three (3)-year statute of limitations applicable to tax returns that begins to run upon the filing of a return.

Employment tax records must be retained for at least four (4) years.
To ensure compliance with the Code’s record retention requirements, employers may want to retain for at least five (5) years (i.e., rounding up from the date that is four (4) years after the last tax for that year is due or would ordinarily be paid).
Other Benefits-Related Retention RulesFMLA – Records required under DOL regulations must be kept for no less than three (3) years

Grandfathered Plan Status – Documentation needed to verify grandfathered status must be retained for as long as the plan takes the position that it is a grandfathered health plan.

Reinsurance Contributions – HHS requires that self-insured health plans required to make reinsurance contributions maintain documents and records sufficient to substantiate the enrollment count submitted for at least ten (10) years.

ADEA, ADA and Title VII – EEOC regulations require employers to keep various records, including the plan document, for at least one (1) year after termination of a plan. In the case of an enforcement action, the employer will be required to keep the plan document until the final disposition of the action.
 

Conclusion

Note that all these requirements may not apply to every employer, and as mentioned above, there could be other reasons to adopt different time frames (e.g. union contract details, merger and acquisition requirements, state and international rules, etc.). Consideration should be given to retaining certain items as part of the plan’s permanent records. These include plan documents, plan amendments, records showing the adoption of a plan and its amendments, plan summaries (including SPDs and SMMs), claims procedures, and claims records.

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.