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jpod

Statute of Limitations

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This topic is very helpful with a current issue we have.  We have an active DB plan who received a request from a former employee / former participant asking about his benefit under the plan.  The individual terminated over 17 years ago and appears to have requested a lump sum payment after termination.  Not clear why the individual has surfaced now but the plan sponsor / plan administrator was hoping to simply show proof of distribution and move on.  Unfortunately, they have looked everywhere and have not found any records showing a clear lump sum was sent / delivered to participant.  There is some thought a check may have been cut but sent to outdated address.  There appears to be no definitive record that the payment ever reached the participant--no record of the check, no 1099 copy, no participant tax record, no escheat record, etc.

My basic question is one touched on somewhat above but I do not believe directly answered---is there a clear records retention period under ERISA as to how long a plan administrator must keep a record of payment?  Is that basically the same as the indefinite period noted above for holding records necessary to calculate a benefit?  Also, does anyone have an answer / experience to the questions raised above about accepted statute of limitations in these situations.  If it can be proved that the participant knew off / requested a distribution so long ago, then if they did not receive it (which would seem only basis for inquiry now), then couldn't they be barred from coming back to the plan now.  This is not the case where a plan terminated and the participant went missing.  Thanks in advance for your assistance.

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Under ERISA the onus is in the plan to show it made benefit payment and retain such records.

As to why they are coming out of the wood work now it's possible they were reported on Form SSA and are just now applying for social security benefit and received a "you may be entitled to benefits form the XYZ Plan.

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Thanks, Lou.  That's what we generally suspected. 

 

Just to be sure I'm following correctly though, does that mean they need to keep records supporting proof of payment forever?  (I don't necessarily disagree with that sort of obligation but, as noted in the comments above, that sort of differs from the real world most of us operate within.)

Also, is there any exception to that obligation based on some general statute of limitations?  if, hypothetically, the plan could prove the participant had notice and had elected a lump sum distribution over 15 years ago, it doesn't make sense that they would just now be seeking to recover if the lump sum had never been paid.  Based on that, wondering if there might not be some defense for a plan that may have "purged" payment records after say 10 years?  Thanks.

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I honestly don't know the answer to your question. But I would guess if you had evidence they elected a lump sum and have plan records that they are no longer included in any plan reports, especially if those reports have other long time terminated employees on them still owed a benefit it would probably carry a fair amount of weight in any argument in the Plan's favor that the participant had in fact been paid out.

Back in the day when records were all on paper and sometimes stored off site in a warehouse in little boxes it made sense to purge such records. Now with the cheap electronic storage keeping them virtually forever is an option. Of course that doesn't help when a participant who has been gone since the early 90s resurfaces now with a possible benefit claim.

 

 

 

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