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Presented by Fred Burgess
Second Quarter 2019

401(k) Plan Record Retention: Be a Saver

Spring cleaning is a popular ritual for good reason—the annual decluttering of your house, garage, yard, or office space is highly satisfying. But if you’re in charge of administering your company’s 401(k) plan, resist the urge to recycle old retirement plan documents, reports, and records. Why?
Because one of ERISA’s key rules for benefits plans pertains to the retention of plan documents and records. Let’s review how ERISA’s mandates apply to your retirement plan, as well as how to keep your records and files tidy while fulfilling your fiduciary responsibilities.
ERISA Sections 107 and 209 state that plan and participant documents, records, reports, and information must be retained for a period of six years after the filing date or, in some cases, retained in perpetuity. Here’s a basic list of items—organized into two categories—that retirement plan fiduciaries must retain for the specified periods:

Keep these records in perpetuity:

• Executed plan documents (original 401(k) plan document, adoption agreement, amendments, restatements, and summary plan description)
• Documentation related to investment or retirement plan committee meetings (investment policy statement, meeting minutes, quarterly or annual financial reports, and internal electronic or written communications that discuss the decision-making process)
• Forms used to process distributions, loans, qualified domestic relations orders, and hardship distributions, including backup documentation

Keep these records for at least six years:

• Annual tax filing forms (IRS Form 5500, summary annual reports, and, if required, audited financial statements)
• Participant records and forms pertaining to salary deferral elections or changes; plan enrollment; dates of hire, termination, and eligibility; compensation; beneficiaries; and breaks in service
• Annual nondiscrimination testing results
• Fidelity bond coverage and/or fiduciary insurance coverage
• Participant communications (e.g., enrollment materials, educational seminar materials, and 404(a)(5) fee disclosure notices)

Electronic Storage Considerations

If your office is paperless, the use of technology to store documents is allowable under ERISA, provided some key conditions are met. If your plan’s recordkeeper, third-party administrator, or plan advisor offers virtual fiduciary vaults, you can use this option to maintain records electronically in compliance with ERISA’s document storage mandate. And here’s another big benefit of electronic storage: if your plan is audited by the IRS or the Department of Labor, providing complete, accurate documents, reports, and records upon request will be simple. Not only will you save time and energy, but you could avoid paying penalties for failure to comply with ERISA’s record retention requirements.

To sum up, retirement plan fiduciaries should focus on two key principles to stay compliant with ERISA record retention rules: organization and preparedness. Having—and abiding by—an efficient system for retaining retirement plan documents is paramount!

Tipping the Talent Scale: Robust Retirement Plans

Business owners, CEOs, and human resource managers know that human capital is an organization’s most valuable asset. And when it comes to attracting the high-quality employees who will propel your company ahead of competitors, factors such as compensation, culture, perks, and career advancement opportunities are pivotal. But they’re not the whole story. There’s another key tool for talent acquisition and retention—your company’s retirement plan. Let’s review how (and why) this benefit could tip the talent scale in your favor.

According to recent U.S. Bureau of Labor statistics, unemployment rates are at historical lows and hiring trends remain strong. Yet wage growth is tepid, and employees are leaving jobs for better opportunities. Job candidates have choices, so employers need to be creative to win them over. In a survey conducted by the Society for Human Resource Management (SHRM), organizations that offer benefits such as a retirement plan reported better overall company performance than those that did not (58 percent versus 34 percent).

Powerful Plan Designs

So, how can you leverage the power of retirement plan benefits? What will influence the decision-making of future and current employees? Here are four persuasive features to consider:

1. Focus on financial wellness. Step outside the traditional box of retirement planning education and deliver guidance on other financial topics as well. Help employees save for college expenses, manage debt, and handle estate planning. Programs like this do more than improve financial literacy—they foster employee loyalty, satisfaction, and productivity.
2. Take a fresh look at your company match. Is the matching contribution an attractive incentive for top candidates? How does it measure up against industry-peer averages? Are employees immediately eligible to receive the match, or do they have to wait a year?
3. Go beyond the 401(k). To attract top executive candidates, profit-sharing, cash balance, defined benefit, deferred compensation, and employee stock ownership plans are effective benefits. Think about alternative plan designs that give key talent a bigger slice of the pie.
4. Offer a generous vesting schedule. When comparing two job offers, employees may consider the length of time required to become 100 percent vested in the employer’s retirement contributions. Adjusting the schedule (e.g., changing a five-year schedule to a three-year schedule) may turn the decision in your favor.

Plan Sponsors Ask: Spousal Consent Rules

Q: As the person in charge of administering our company’s 401(k) plan, I handle beneficiary changes and distribution requests for our employees. Why is an employee required to have his or her spouse consent when requesting a change of beneficiary or a distribution? The rules are confusing and difficult to explain.
A: Generally, defined benefit or defined contribution plans require plan participants to obtain a written waiver, signed and notarized by their spouse, in two circumstances: (1) to change the beneficiary or (2) to take a withdrawal from their account. The rules for spousal consent originated in the Retirement Equity Act of 1984, which amended ERISA. The act protected benefits for spouses by preventing an account owner from making critical decisions without the spouse’s knowledge. Here’s why: a spouse of a plan participant has an automatic legal interest in that account owner’s retirement plan assets.

If the account owner wishes to appoint someone other than his or her spouse as the beneficiary, the spouse must agree in writing to forfeit his or her interest via a spousal consent waiver that is signed and notarized. Similarly, certain retirement plans include a qualified joint and survivor annuity. This feature provides a plan participant with a lifetime annuity; it also provides a survivor annuity for the participant’s spouse if the spouse outlives the plan participant. The participant can waive this type of benefit with spousal consent. Remember, when in doubt, always follow the terms of your plan’s document, and consult with your service provider such as a third-party administrator or record keeper.

We Can Help

Contact us to learn more about meeting your fiduciary duties and using your retirement plan as a talent acquisition tool, as well as to discuss any other aspect of your plan. We’re ready and willing to help.


Fred Burgess
Regent Financial Services
18 Pleasant Street, Brunswick, ME 04011


Commonwealth Financial Network® does not provide legal or tax advice. Please contact your legal or tax advisor for advice on your specific situation. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
Authored by The Standard and the Retirement Consulting Services team at Commonwealth Financial Network.
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