How Long Should You Keep 401(k) Statements?

Understanding Document Retention Requirements for 401(k) Plans

The Employee Retirement Income Security Act (ERISA) mandates that employers retain detailed 401(k) plan documents for specific periods to ensure compliance and protect plan participants’ interests. These documents provide a comprehensive record of plan operations, transactions, and employee activity.

General Retention Period

As a general rule, 401(k) plan records must be preserved for a minimum of six years following the filing date of the IRS Form 5500, which summarizes the plan’s financial and operational status. This six-year period applies to most plan documents, including:

• Plan Documents: Adoption agreement, base document, IRS advisory letter, amendments, QDRO policy, and loan policy
• Participant Disclosures: Summary Plan Description (SPD), Summary of Material Modification (SMM)
• Corporate Actions: Resolutions, agendas, minutes, and meeting materials
• Service Agreements: Contracts with plan service providers
• 408b-2 Fee Disclosures: Details of fees and services provided by plan service providers
• Fidelity Bond: Proof of bonding for plan fiduciaries

Extended Retention Period for Participant-Related Records

Certain 401(k) plan records related to participants must be retained indefinitely or for as long as they remain relevant to determining benefit entitlements. These records include:

• Payroll Records
• Participant Deferral Election Forms
• Investment Election Change Forms
• Beneficiary Designation Forms
• Distribution Request Forms (with supporting documentation)
• Loan Request Forms
• Rollover Requests
• QDRO Split Requests (with supporting documentation)

Plan Year-Specific Records

For each plan year, the following records should be retained:

• Annual Valuation: Participant-level transaction information, including contributions, distributions, and fees
• Annual Trustee/Custodian Report: Trust-level transaction information, including purchases and sales
• Annual Nondiscrimination Testing: Results of required tests, such as coverage, ADP/ACP, excess deferral, annual addition, top heavy, and rate group testing
• Annual Participant Notices: Participant fee disclosure, safe harbor notice, QDIA notice, and automatic enrollment notice
• Form 5500: Copy of the Form 5500 filed with the Department of Labor (DOL)
• Independent Audit Report: If required to be filed with Form 5500
• Summary Annual Report: Summary of Form 5500 provided to participants

Consequences of Non-Compliance

Failure to retain required 401(k) plan records can result in penalties, even if the missing records do not directly impact the plan’s operation or benefit payments. The absence of proper documentation can hinder the plan sponsor’s ability to defend plan operations and the accuracy of benefit payments if challenged by the IRS, DOL, or plan participants. This can increase liability and legal exposure.

Recommended Document Organization

To ensure efficient document management and easy access, it is advisable to organize 401(k) plan records into three categories:

• Plan Document File: Contains governing documents and historical records
• Participant File: Houses forms and requests submitted by participants
• Plan Year File: Stores records specific to each plan year

Understanding and adhering to 401(k) document retention requirements is crucial for plan sponsors. By implementing a systematic record-keeping process, plan sponsors can fulfill their fiduciary responsibilities, protect participants’ interests, and minimize potential legal risks.