(b)lines Ask the Experts – Record Retention for Non-ERISA 403(b)s

“But I work for a church plan sponsor whose plans are not subject to ERISA. Is it best practice for me to follow the ERISA standards for record retention as well, even though our plans are not subject to ERISA?”

Stacey Bradford, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

It may be advisable for any plan that is not subject to ERISA to follow its document retention requirements nevertheless because ERISA is considered the “gold standard” of fiduciary behavior. Plus, retaining documents can also make defending claims easier for the employer when the documents with relevant information are available. 

As a reminder, ERISA section 107 requires plan administrators to retain records that support any report required to be filed for at least six years after the filing date. Although a church plan is not required to file, for example, a Form 5500 annual report each year with the U.S. Department of Labor, information used to prepare a Form 5500 should be retained for a minimum of six years. Such information includes plan-level financial reports, contribution and distribution records, and plan investment information. 

In addition, ERISA section 209 requires an employer to retain records necessary to determine any benefit due or which may become due to an employee and to supply those records to the plan administrator upon request. The documents covered by Section 209 may include each employee’s name, address, years of service, hours reports, earnings information and any other document (including plan documents themselves) that might be relevant to a benefit determination. Don’t forget beneficiary designations. It may be necessary to keep these for a substantially longer period, until the risk of claims against a distributed account have lapsed.

Documents may be retained in electronic form or on microfilm or microfiche, provided projection or viewing equipment is available. The records should be kept in a reasonable order in a safe and accessible place and made available at no cost (except for actual copies) to participants and beneficiaries. 

In addition, the Internal Revenue Service (IRS) has its own record retention rules that apply to a plan whether or not it is covered by ERISA. Records of information included on a tax return must be kept for at least four years after the later of the date the tax is due or the date it is paid. See IRC section 6001. For example, payroll records would be subject to the four-year retention period. But, they should probably be retained indefinitely under the ERISA standard if necessary for a participant’s benefit determination. 

Also, IRC section 6704 requires all tax-exempt trusts to keep records containing data necessary for current or future reporting. Such data includes participants’ and beneficiaries’ names, dates of birth, and dates, amounts and frequencies of payments. All records supporting tax-qualified status of a plan must also be retained. These records might include a favorable determination letter and compliance testing results (e.g., with annual contribution limits or nondiscrimination testing requirements). 

Both the U.S. Department of Labor and the IRS have issued regulations explaining their record retention requirements that any plan may (or must) follow. If you have any question about whether to retain a particular document, err on the side of caution and keep it, or call legal counsel for advice.

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.