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Hang On To Your Records

By Jerry Kalish

Forget about that so-called “7-Year Rule” for maintaining your business records. That’s what Attorney Christine Branstad tell us in a recent post in the IowaBiz Business Record Blog.

It may be a tax guideline, she says, but it’s a business and legal myth. She goes on to explain why and offers the following advice: "work with your attorney to design a record retention plan. Be sure the plan covers paper records and electronic data. Once you have a record retention (and destruction) plan, integrate that plan into your business processes."

But there’s an additional retirement plan component to all of this, particularly as the July 31 deadline for filing a Form 5500 for most retirement plans approaches. The myth here is that retirement plan records only have to be retained for a period of at least six years after the date of the filing of an ERISA-related return or report, and that the materials should be preserved in a manner and format (electronic or otherwise) that permits ready retrieval. All records that support the plan’s annual reporting and disclosure should be retained, this myth goes.

Now here’s the practical side of it. While it is fairly common for a plan sponsor to contract with outside service providers, such as our firm, who provide certain reports and prepare the 5500 filing, the Plan Administrator remains ultimately responsible for retaining adequate records that support these reports and filings. In addition, the Department of Labor requires employers to maintain records sufficient to determine the amount of benefits accrued by each employee participant.

Instead of relying on the “6-Year Rule", best practices would be to maintain certain records for the life of the plan. The thicker the paper trail, the easier it will be for the plan to respond to an inquiry from a governmental agency or a request for information from a plan participant.

Both the Internal Revenue Service and the Labor Department, the federal agencies that have oversight of retirement plan tax aspects and reporting requirements respectively, can and have requested information for periods “back in the day”.

It’s far easier to have the records in the first place than to have to recreate them for the IRS or DOL.

Jerry Kalish is founder and President of National Benefit Services, Inc., a Chicago-based employee benefit consulting and administrative firm that serves private-held companies, publicly traded companies, and public sector employers. He blogs at The Retirement Plan Blog and can be reached at jerry@nationalbenefit.com.

Comments (1)

June 30, 2009 10:24 AM

Comments (1)

Christine Branstad:

Mr. Kalish - great post illustrating the need to make early determination about how and when to store records. HR records (including benefits records) have a differnt dynamic than operating financial records or technical records or general correspondence or outgoing marketing materials.

Posted by Christine Branstad | July 6, 2009 4:31 PM

Posted on July 6, 2009 16:31