I cannot tell you how many times over the years pension plan participants have called me to complain that their employer or pension plan administrator has told them they cannot find documents needed to determine whether they are eligible for a pension and, if so, the amount. That is ridiculous! Under §209 of the Employee Retirement Income Security Act (ERISA), employers must maintain records with respect to each of their employees sufficient to determine any benefits which are, or may become, due the employees. The statute does NOT put a time limit on this record-retention requirement. Therefore, the documents must be retained INDEFINITELY (or at least as long as it can be presumed that the participant is no longer alive).
Documents frequently needed to determine a participant’s eligibility for benefits and benefit amount include–
- The participant’s dates of hire and termination, and any rehire dates;
- The date the participant became eligible to participate in the plan;
- The participant’s history of credited service and the date the participant became vested;
- The participant’s compensation history;
- Any forms showing the participant elected to defer part of his salary into a 401(k) plan;
- Any beneficiary designation forms signed by the participant;
- Records of any distributions requested or received by the participant;
- Records of any rollovers made or requested by the participant;
- Records of any loans requested, received, or paid by the participant.
This list is not exhaustive. Therefore, if other documents are needed to determine a participant’ eligibility for benefits and benefit amount, they must also be retained indefinitely (or at least until it can be presumed the participant is dead). While the statute is clear as a bell on this issue, problems continue to arise, perhaps because the statutory penalty for failing to comply is minuscule–$10 for each employee with respect to whom such failure occurs–and the penalty is payable to the Secretary of Labor, not the participant.
Some courts have dealt with a failure to retain necessary documents by shifting the burden of proof on a participant’s claim to the employer. So, for example, where a participant claimed the employer never provided him a COBRA notice, the court held that the employer bore the burden of proving it had done so (as opposed to the participant having to prove the employer had not done so). Stanton v. Larry Fowler Trucking, 52 F.3d 723 (8th Cir. 1995).
Congress needs to amend ERISA §209 to increase significantly the penalty for failing to retain necessary documents, and to make the penalty payable to the participant. Only then will plan sponsors and plan administrators be sufficiently motivated to maintain necessary documents for as long as they might be needed.
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