Sometimes we work with a new client, and they ask, “how long do I have to keep this?” or “since you are taking over, can I get rid of what the other service provider gave me?” Unfortunately, the answer to those questions is no, but there are ways to clean out the filing cabinet.
Ask yourself why
The first thing to remember is why you have the documentation. It may be a plan document, a valuation, your copy of Form 5500 (and audit), or an enrollment form. Each has a required “keep” period. After that is over, there is a suggested “keep” period. It is challenging to decide which rules to follow. We can clear that up for you.
Plan-level documentation
Items like plan documents and amendments, Form 5500s, audits, financial and trust statements, and invoices should be kept for at least six years from the plan year in which they were affected or expired, whichever is later. For example, we recently completed the Cycle 3 Restatement period for plan documents to replace the prior document. Using the six-year rule would mean that the Cycle 2 Restatement or the PPA Restatement would need to be kept on file until the end of 2028. The Form 5500, and accompanying work papers, filed in 2016, can be destroyed at the end of 2022.
Participant documentation
Now the unwelcome news. You must keep participant documentation indefinitely. In Proposed DOL Regulations 2530.209-2(d), “participant benefit records must be retained as long as a possibility exists that they might be relevant to a determination of the benefit entitlements of a participant or beneficiary.” This includes employment information used to determine eligibility for the plan, enrollment and change forms, beneficiary forms, statements, loan and distribution requests and documents, and any Qualified Domestic Relations Orders.
Cloud-based storage & backups
Take advantage of cloud-based storage. Push everything involved in your plan to the cloud and keep it organized. Set up a folder for plan information separate from participant information. Then use sub-folders for plan years to keep everything separated. If you want, you can go deeper and have folders for each document type (distribution, Form 5500, invoices, etc.) It only matters that you can find what you are asked for by a participant, auditor, or agent when requested.
We also recommend that you have a backup in case something happens to the cloud storage. A hard copy of the plan document in the office is recommended. Using a second vendor or cloud storage option in case something happens to your primary server is prudent. You must remember to add or replace backup files when you update your main storage file.
It is essential to use good cybersecurity hygiene cloud storage. Features such as encryption, multi-factor authentication, and strict access control with rotating passwords can help ensure that plan information is protected and accessible.