A Plan Sponsor’s Guide to Document Retention
In the words of the great philosopher Marie Kondo, does this document spark joy? Doesn’t matter. If it’s a 401(k) or health and welfare plan record, the IRS says keep it anyway — for at least six years, joy or no joy.
Document retention is not a thrilling topic. Nobody has ever finished a plan committee meeting and said, “Well, that record-retention discussion really got my blood pumping.” But it is the kind of boring that lets you sleep at night, because when the IRS or DOL comes calling, “we’re pretty sure we did it right” is not a defense. Documentation is.
Why This Actually Matters
Most all employee benefit plans live under the joint oversight of the IRS and the Department of Labor, and if your plan gets pulled for audit, the burden of proof lands on you, the plan sponsor — not on the agency asking the questions. No documentation, no proof of compliance. And no proof of compliance turns even the smallest plan into a very large headache, very quickly.
Under ERISA and IRS recordkeeping rules, employers need to retain the records supporting their 401(k) and health and welfare plans — testing results, transactions, employee activity — for a minimum of six years. Some records (think anything tied to calculating a participant’s ultimate benefit) effectively need to stick around even longer, because you may need to reconstruct someone’s account history decades from now when they finally take a distribution from their 401(k) account, for example. Six years is the floor, not the ceiling.
Here’s the equation to remember: retirement plan + paper trail = peace of mind. Lose the paper trail, lose the peace of mind.
So What Exactly Do You Need to Keep?
As old plan documents get replaced by new ones, resist the urge to hit delete. Archive the old version — you may need it to answer a question about what the plan said in, say, 2015, when a claim from that era resurfaces. Below is a general roadmap of what you, as plan sponsor, should be holding onto:
- Plan Documents and Amendments — your plan document, trust agreement (for retirement plans), and every amendment along the way.
- Summary Plan Descriptions — plus any Summaries of Material Modification (SMMs) issued to participants. Keep a spreadsheet or text document with the date of when you distributed the SPD and/or SMM and to whom.
- Form 5500s — at least six years of annual returns, along with every schedule and attachment.
- Compliance Testing Records — ADP/ACP, Section 415, Section 410(b), and Top-Heavy test results for retirement plans; Concentration, Section 105(h), and other nondiscrimination test results for health and welfare plans.
- Participant Records — for retirement plans, enrollment forms, beneficiary designations, loan agreements, hardship withdrawal documentation, and distribution records. For health and welfare plans, enrollment forms and claims and appeals documentation.
- Payroll and Contribution Records — proof that contributions were made accurately and on time.
- Board or Committee Meeting Minutes — any decision touching plan administration should be documented and dated, not just remembered fondly. Similarly, any fiduciary reviews should be documented and kept for at least six years.
- Fidelity Bond (for retirement plans) — a copy of current coverage.
Of course there are more edge cases than that (there always are), but if you’re holding onto all eight of these categories, you’re in solid shape.
Bottom Line
An IRS audit doesn’t have to feel like a fire drill. With the right records in the right place, you can walk into any audit with confidence instead of dread — and get a good night’s sleep in the meantime. As always, there are plan-specific nuances that should be reviewed before finalizing your own retention practices, so treat this as a starting checklist, not the final word.
Need help evaluating your current retention practices? Marie Kondo isn’t going to help you with this one. We are.