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Record Retention — The “Paper” Trail

June 12, 2023 by Admin

As plan sponsors are well aware, the pension law (ERISA) includes specific reporting and disclosure obligations with respect to qualified retirement plans. A lesser known fact is that ERISA also has specific requirements regarding the retention of plan records. Below we answer questions you and other plan sponsors may have about retaining records and the importance of a record retention policy.

Why would we need a record retention policy? A retirement plan, by its very nature, generates a large amount of documentation. Some records should be retained indefinitely. Others may be disposed of in time. Having an established document retention system that allows plan records to be reviewed, updated, and preserved or disposed of in an organized fashion fosters good administration and helps the plan comply with pension law. Such a system can also make required documents readily accessible for IRS review, if requested.

Who is responsible for retaining plan records? Under ERISA, the plan administrator — which is often the plan sponsor — is ultimately responsible for maintaining the plan’s records.

What records do we need to keep? The list is long. First, you need to keep all records that support the information included in your plan’s Form 5500 filings and other reports and disclosures. These supporting documents essentially include whatever records a government auditor might need to verify the accuracy of the original report or disclosure. You also need to keep records used to determine eligibility for plan participation and any plan benefits to which employees and beneficiaries may be entitled. Records include:

  • The original signed and dated plan document, plus all original signed and dated plan amendments
  • Employee communications including summary plan descriptions (SPDs), summaries of material modifications (SMMs), and anything else describing the plan that you provide to plan participants
  • The determination, advisory, or opinion letter for the plan
  • All financial reports
  • Copies of Form 5500
  • Payroll records used to determine eligibility and contributions, including details supporting any exclusions from participation
  • Evidence of the plan’s fidelity bond
  • Documentation supporting the trust’s ownership of the plan’s assets
  • Documents relating to plan loans, withdrawals, and distributions
  • Nondiscrimination and coverage test results
  • Employee personal information, such as name, Social Security number, date of birth, and marital/family status
  • Employment history, including hire, termination, and rehire dates (as applicable) and termination details
  • Officer and ownership history and familial relationships
  • Election forms for deferral amount, investment direction, beneficiary designation, and distribution request
  • Transactional history of contributions and distributions

How long do we need to keep the records? Generally, you should keep records used for IRS and DOL filings for at least six years after the filing date. Retain records relevant to the determination of benefit entitlement indefinitely (basically, permanently).

Filed Under: Retirement

Plan to Work Past Retirement Age?

October 24, 2022 by Admin

Happy old elderly senior grandparents family couple clients signs financial insurance, pension, startup, dealing handshake agent lawyer, agreement with customers on investment contract, bank managerOf the more than thirty-four million Americans age 55 and older who were employed in 2020, over nine million were individuals age 65 and older.* People continue working past the traditional retirement age for a variety of reasons. Some actually enjoy what they do for a living. Their work gives meaning to their lives and helps fill their days, and they appreciate the company of coworkers. Others have to work since they cannot afford to retire. And there are other people who choose to continue working because of employer-provided benefits or because they want extra time to build up their retirement savings.

The Financial Benefits of Working Longer

Staying longer in the workforce can yield several significant financial benefits:

  • Regular paychecks
  • Potential for overtime and bonuses
  • Ongoing contributions to a retirement plan
  • Continued access to employer-provided benefits, such as health care coverage
  • Additional payments into the Social Security system that could boost the amount of final Social Security retirement payments


Potential Roadblocks to Working Longer

There’s no guarantee that someone who wants to stay in the workforce will be able to continue working. A person’s plans could be sidelined by:

  • An illness or disability
  • The need to care for a spouse or other family member
  • A downturn in the economy and the job market
  • A mismatch of skills and available job openings

Preparing for All Eventualities

Too many people reach retirement age, find that they can’t afford retirement, and discover that there are limited opportunities for finding post-retirement-age work. You can avoid this scenario by using your earning years to set aside money for your retirement. Irrespective of how much you earn, you should focus on making regular contributions to your employer-provided retirement plan or to an individual retirement account.

The reality is that you may need an annual income in retirement that is not all that different from your current income — especially if you anticipate an active retirement that involves frequent travel or expensive hobbies. When evaluating your potential retirement income needs, you will need to consider these factors:

  • Your retirement may last well into your 90s.
  • Inflation will likely occur.
  • Health care costs could increase as you age.
  • Payments from Social Security will only cover the basic necessities of life.

Talk With a Financial Professional

Your financial professional will examine your contribution levels and your investments to see if there are any weaknesses in your current strategies. You may need to boost your retirement plan contribution percentages and reevaluate your current investment selections and asset allocation** in order to afford the type of retirement you want.

 

Filed Under: Retirement

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