Leaderboard

While I can't tell you how long to save emails I can tell you a sad story about losing emails. Basically, as a small TPA, our IT department is me. While we do follow a strict backup schedule, there are some areas that are harder to backup than others. Specifically, the emails on each work station that don't go through our primary server, but use the individual email client. To account for this we periodically backup the individual work stations, but not as frequently as the primary server. (I note that if my terms are a bit off, sorry.) Anyway, in between backups for one workstation, which happened to be an old computer that I used to use so it was no longer considered a priority, that computer said goodbye to the living in the PC World. On that computer were old emails that were from 2014. Wouldn't you know it, in 2021 when I was literally fighting for my life with cancer, those emails became important. While I won't get into details, the lack of those old emails and related files, cost me a great deal. Oh well, just one of life's little misadventures I guess.

About records retention, there is no one uniform answer that’s right for every service provider. Many possible approaches to records retention and records destruction turn not only on what public law might require but also on what a holder or processor of records seeks to accomplish or avoid. Here’s a list of some questions I ask when I help design a TPA’s, recordkeeper’s, or similar service provider’s records-retention/destruction plan: How often does it happen that a client’s question, worry, or request, or the service provider’s response, is in email and is not fully described in other writings? Does the service provider want to be ready to save a client from the client’s failure to keep a record it ought to have kept? How much value might old records have as knowledge management for how the service provider does its work? Does the service provider or an affiliate sometimes offer services as a § 3(16) administrator? As a plan’s trustee? As an investment manager? Does the service provider or an affiliate sometimes offer banking services? Insurance-agency services? Securities broker-dealer services? Investment-adviser services? Has the service provider made any agreement with another service provider or a financial-services business? Read each of those agreements to find records-retention obligations. What does the provider’s service agreement say about delivering or keeping records after either party ends the service? Are some workers of the service provider arguably practicing law, accounting, or another profession, which might impose distinct records-retention duties? Or privacy and security duties? Which U.S. States’ privacy or security laws might burden the service provider? Which European and other nations’ privacy or security laws might burden the service provider? How strong or weak are the service provider’s systems in not receiving, or limiting the use and keeping, of records that could reveal sensitive personal information, especially a Social Security Number (or ITIN) or a date of birth? Does any record about a client ever get used in evaluating an employee’s job performance? (Employment-related laws might impose a retention on a record so used.) In which States are the clients located? Where are participants located? Considering the clients’ States, what is a typical statute-of-limitations period for a breach-of-contract claim? Considering those States, what are the potential statute-of-limitations periods for a third person’s negligence claim? Considering the service provider’s usual forms of agreements, do they always, often, seldom, or never specify which State’s law governs the agreement? How often is the chosen law the service provider’s preference? How often is it the client’s preference? Considering the service provider’s usual forms of agreements, do they always, often, seldom, or never specify a time limit on claims against the service provider? How often do clients face IRS, EBSA, and other document-production demands? How often does the service provider itself face IRS, EBSA, and other document-production demands? Does the service provider charge a client expenses, fees, or both for a document production? If there are document productions for the IRS’s examination of a client or a client’s plan, will the client or the service provider seek the IRS’s reimbursement of document-production expenses? Are the service provider’s records likely to include some for which a client might assert the client’s evidence-law privilege, including for lawyer-client communications or IRC § 7525 practitioner-taxpayer communications? Are the service provider’s records likely to include some for which the service provider might assert its own evidence-law privilege, including for its lawyer-client communications? How practically useful are the systems in sorting writings (including emails and mobile-device texts) to segregate or identify those for which a client or the service provider might assert an evidence-law privilege? If, for an IRS examination, EBSA investigation, or something else, a client or the service provider must furnish a privilege log, how efficiently could you assemble it? How much would have to be done by human intervention? How easily could you prove you obeyed your records-destruction plan?

When I worked for a CPA firm, our policy was archive after 12 months and purge after 7 years for emails (unless we were notified of litigation, in which case those emails would segregated and saved past 7 years if necessary).

Side note: does the plan offer hardships for safe harbor reasons? B/C it doesn't seem like his request satisfies one of the reasons...

Because 72(t) doesn't authorize it. Let him enjoy a warm freshly-printed page or two of Code and regulations. (or have him take the last bit of these needed funds as a loan which I'm suspecting may not be readily doable either...)

Pammie, here are some links to the IRS website that you can send to the participant: The first describes hardship withdrawal rules and mentions the possibility of paying a 10% excise tax: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-hardship-distributions The second is a detailed table of exceptions to the 10% excise tax on early distributions and references to the tax code: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions You may want to point out the line that for Homebuyers. There is no exception to the tax for distributions from a 401(k) plan for a Homebuyer, but there is an exception for distributions from IRAs for up to $10,000 for qualified first-time buyers (with a lot of rules is 72(t) defining a qualified first-time buyer). I suggest everyone should at least bookmark or print the table of exceptions as a handy reference for when the 10% penalty is not applicable.

Even if there is no duty to do so, some administrators and their service providers respond to a query of this kind. One might invite the inquirer to look at the plan’s form for requesting other kinds of before-severance distributions—for example, a qualified birth or adoption distribution or qualified disaster recovery distribution—and ask whether a claim on the circumstances that allow a hardship distribution also would fit one of those other categories. That illustration might be most effective if one can say the plan provides all early-out possibilities tax law permits. Or if the question is why doesn’t the Internal Revenue Code provide an exception from the too-early tax for my situation (or why does tax law impose a too-early tax), the 1970s reply was “write your Congress member.” A 2023 reply might be “neither of us was elected to Congress.” I have had clients use Bri’s way of showing an inquirer relevant law, using not a secondary source but one published by the U.S. Government Publishing Office, so it looks “official”. Until recently, that might have been awkward because the Office of the Law Revision Counsel of the United States House of Representatives had not yet edited the United States Code to follow Congress’s Act of December 29, 2022. Title 26’s section 72 now is recompiled. I.R.C. (26 U.S.C.) § 72(t)(2) http://uscode.house.gov/view.xhtml?req=(title:26%20section:72%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section72)&f=treesort&edition=prelim&num=0&jumpTo=true#72_4_target

If a nonowner employee is a participant at any point during the plan year, Form 5500-SF should be used.

this is iffy as suggested by OP. IMHO, the answer resides in the future use of the assets discovered. Will the money be used to benefit the participant (after the fees paid)? If yes, then it MIGHT be paid from the trust. Will the money revert to the Employer? If no, then it is more of a settlor function.

Generally, administrative expenses paid from the plan are for routine administrative services like recordkeeping, compliance, 5500s, investment monitoring, and plan audit. This does not sound like an administrative service, and if the plan sponsor had engaged search company to retrieve the unclaimed assets, that would seem to be more of a settlor expense (basically CYA for not being a diligent fiduciary). Just an opinion. Did the search firm provide any information about the potential source of the unclaimed funds? Were they attributable to a dormant account in the name of the plan? Or, possibly were they in a bank account that was used to pay distributions and amounts from uncashed checks were redeposited? Were they attributable to a litigation settlement and put into an account that was otherwise ignored? When the assets were returned to the plan sponsor, what was deposited into the plan's trust - full amount of what was missing, the net amount after the search company fee, or nothing (the plan sponsor kept it)? The answers likely will lead to a host of other questions.

Were assets “returned” to the sponsor or the plan? How were the funds unclaimed? I realize that my questions are not directly in line to answer your question. The circumstances are quite curious. If plan assets were somehow “unclaimed” it may suggest breach of fiduciary duty at some time. In my limited experience with unclaimed funds bounty hunters (not involving any plan) one should consider an independent search for funds after being first approached by the bounty hunter, but it sounds like that time has passed. Circumstances dictate appropriate responses and the circumstances of unclaimed plan funds is a new one on me. Or maybe I misunderstand what you are describing.

I know nothing about finding records, etc., but I pulled this write-up off the internet. I can't vouch for its accuracy, but if true, perhaps the regulatory authorities might be able to provide you with some insight. https://www.fa-mag.com/news/ex-lpl-advisor-pleads-guilty-to-robbing-clients-of-more-than--2-8m-69610.html

I have railed against the use of TPA to describe what we do since time immemorial. I have lost that argument, but I still don't refer to ourselves as a TPA and I correct anyone who uses that term with us. We use the phrase "retirement plan service provider" or just plain "service provider". Because, I ain't a THIRD PARTY anything! We're a FIRST PARTY with our clients. I ask clients if they would refer to their atty or acct as a "third party atty or acct". Same thing with us. We represent the client directly, not as a third party. The phrase TPA came from the health insurance industry where there really is a "party of the third part" which is different than the party of the first part (the client) and the party of the second part (the insurance company) who then go out and hire a true THIRD PARTY to do some work on their behalf. What a mistake our industry has made and continues to make.