Retaining Documentation from Previous 401(k) Providers

The IRS has been known to investigate plans dating back three years if they have reason to suspect the numbers aren’t adding up right. To be on the safe side, 401(k) records should be kept for a minimum of six years after filing Form 5500, as indicated in ERISA Section 107.

What happens to old 401(k) documents when switching providers?

There is no need to worry about what will happen to old 401(k) documents when you switch to a new provider. During the transition, the old recordkeeper is legally required to hand over all files and documents to the new recordkeeper. Depending on how organized or cooperative the old provider was, this process can take anywhere from 24 hours to three months. The new 401(k) provider will review all plan documents line by line and make sure all the necessary files have migrated over. There is generally a brief blackout period for one to 10 days where the data changeover takes place, and changes cannot be made to individual accounts.

Why is 401(k) documentation retained?

Section 107 of ERISA requires you to “maintain records to provide sufficient detail to verify, explain, clarify, and check for accuracy and completeness” in your benefits plan. Similarly, Section 209 states employers must maintain employee records “sufficient to determine the benefits due, or which may become due, to such employees.”

Holding onto these important documents are necessary:

• To remain ready for audits.
• To demonstrate that you are conscientious, careful, and prudent in managing other people’s money.
• To quickly and easily respond to employee documentation requests, changes, or general inquiries.

What 401(k) records should be saved?

To stay organized, a 401(k) plan provider or sponsor should keep three separate files:

A Plan Document File

Archive for historical reference:

• The original signed plan document
• All other plan documents (plan amendments, adoption agreements, IRS advisory letters, QDRO policies, loan policies, base documents)
• Participant disclosures (summary plan descriptions, summary of material modification)
• Corporate actions (agendas, minutes, documents distributed, resolutions)
• Service agreements (plan provider contracts)
• 408-b-2 fee disclosures
• Investment policy statements
• Trust records
• Fidelity bonds

A Plan Participant File

The file should include:

• Payroll records
• Loan request forms
• Participant deferral election forms
• Investment election change forms
• Beneficiary designation forms
• Distribution request forms and supporting documentation
• Rollover requests
• QDRO split requests with supporting documentation
• Participation introduction packets
• Participant fee disclosures
• Blackout notices

All participant-level benefit determination paperwork should be maintained, including:

• Demographic data
• Employee offer letters and proof of compensation
• 401(k) census data
• Payroll records
• Account contribution/earning/loan withdrawal statements

A Plan Year File

For each plan year, a file should contain:

• Annual valuation
• Annual trustee/custodian reports
• Annual nondiscrimination testing results (coverage, ADP, ACP, excess deferral, annual addition, top heavy, and rate group testing)
• Annual participant notices (fee disclosures, Safe Harbor notices, QDIA notices, and automatic enrollment notices)
• A copy of Form 5500 with related schedules
• The independent audit report
• The summary annual report

Preserving necessary documents is easy when you work with a prudent 401(k) provider like Ubiquity. Contact us for details on switching to receive expert 401(k) administration geared toward SMBs for one low, transparent monthly fee. We never charge AUM fee percentages or per-person charges!