Early 90's Participant

[austin3515]

Any suggestions on an employee who walks in with a statement from a pooled account from 1993 and says "I never got my money!"

Are there any options? Is it ok to just say "we don't have it."

[Belgarath]

This is why when clients ask, "How long should I keep plan records?" I tell them forever.

Was it over $5,000 so that it couldn't be cashed out without consent, or was it small enough so that it might be reasonable to think it was cashed out? How old is this person now?

Has the plan been through several TPA's before it came to you (seems like that's the way it usually works...)

SSA's ever filed?

I really don't have any bright ideas on this. Hopefully someone else can provide you with something constructive.

[GMK]

Guess I'd start with the employer and see if they have a copy of an account statement showing the payout, or maybe a copy of the 1099.

Would the IRS have a copy of a long-ago 1099?

Just some ideas. Good luck.

And besides keeping plan records forever, plan sponsors need to be vigilant in requesting (for their own files) copies of documents they may need 20 years from now.

[My 2 cents]

Guess I'd start with the employer and see if they have a copy of an account statement showing the payout, or maybe a copy of the 1099.

Would the IRS have a copy of a long-ago 1099?

Just some ideas. Good luck.

And besides keeping plan records forever, plan sponsors need to be vigilant in requesting (for their own files) copies of documents they may need 20 years from now.

Good luck finding plan sponsors who are worrying about 20 years from now!

As for the statement from 1993:

a. Does it say that the participant was vested? Maybe they were not vested based on the plan provisions at the time.

b. Assuming that the amount is worth the participant filing suit for payment, how do courts react to assertions like "We have no account for this person. If they didn't already received whatever they were entitled to, we would still be holding an account." Or "Our administrative practices called for paying people out when they stopped working for us, and we would have done the same for this person." Is there a bona fide threat of litigation?

Does the sponsor at least have personnel records showing when the person was hired and when they terminated?

Why isn't there some sort of statue of limitations exonerating the plan sponsor when the events happened very long ago?

[austin3515]

I don't think even the best in class companies would be able to satisfy this. It was about $30K, definitely not a force out. I suppose we can just tell him no and see if he sues.

[jpod]

$30K in 1993? So, the potential exposure here is probably $75K or more. The plan sponsor should engage counsel to strategize; that's the cost which needs to be borne as a result of the failure to keep good records.

[hr for me]

I had this happen in 2008 and luckily was able to go back to the recordkeeper and they did have records of the distribution in archives, but the difference in time was only 10 years or so. And was glad we were able to prove the distribution happened.

Back before daily recordkeeping (early to mid 90s), the HR consulting firm I worked for in the 401k dept always did paper reports (quarterly and then an annual bound report) that we instructed plan sponsors to keep forever. I always surprises me the sponsors now don't do the same thing -- that is some type of printed annual document of plan activity (at least contributions/distributions/loans and loan payments). As the consulting firm, we only kept records for 7-8 years and even then getting back to "electronic records" on the old magnetic tapes sometimes was virtually impossible. And electronic storage has changed so much since then. But now I personally think we rely too heavily on It and sometimes wish for the days of paper.

(If I were a betting man and this case actually made it to court and the employer could prove no documentation of payment, I suspect a jury would side with the participant -- especially with so many plans going to paperless where you get no regular account statement... but I don't gamble and am not an attorney nor do I play one on TV)

[david rigby]

Methinks that statute of limitations is not relevant. We're not talking about a crime here; either he was paid or he wasn't. (The ultimate proof of a payment is a canceled check.)

Any personnel records? If you have a DOT, that might help identify a possible payout time/year.

[jpod]

I am not sure, but there may be a limitations period that starts at the NRA. If the participant is beyond NRA this is one of the issues which counsel can address. The limitations period should be the limitations period for breach of contract actions under the applicable State's law.

[My 2 cents]

Methinks that statute of limitations is not relevant. We're not talking about a crime here; either he was paid or he wasn't. (The ultimate proof of a payment is a canceled check.)

Any personnel records? If you have a DOT, that might help identify a possible payout time/year.

Don't most companies purge their records after 7-10 years? While keeping records forever might be commendable, is it ever done?

[MoJo]

ERISA requires the plan to maintain records for as long as necessary to determine benefits payable to participants. If this participant had a balance, the plan had an obligation to maintain records (breach number 1). A statute of limitations under ERISA usually only begins to run when the relationship ends. If this person had a balance in the plan, the relationship never ended and the statute hasn't even begun to run.

I agree with Belgarath - keep plan records forever.... When I advise plan sponsors about contracts with service providers, I always advise them to include provisions that say 1) the records belong to the plan; 2) the service provider can NEVER purge them without plan sponsor consent; and 3) that in the event of the termination of the relationship, the service provider MUST transfer the records to the successor in their entirety or agree to preserve them FOREVER.

Time for counsel to get involved....

[GMK]

Good luck finding plan sponsors who are worrying about 20 years from now!

Found one. I'll bet there's more.

Good luck to plan sponsors who aren't worrying about 20 years from now. I hope they read BenefitsLink and get the message.

[austin3515]

What if someone didn't get that good advice of keep records forever until it was 20 years too late? Also, I can see the rationale for not keeping the records supporting a distribution that took place 20 years ago. Certainly they would be kept forever for people who still have money in the Plan.

[MoJo]

What if someone didn't get that good advice of keep records forever until it was 20 years too late? Also, I can see the rationale for not keeping the records supporting a distribution that took place 20 years ago. Certainly they would be kept forever for people who still have money in the Plan.

Well, once a distribution has taken place, I can see it being reasonable, after an appropriate period of time (like the statute of limitation PLUS a buffer) to purge everything that exists prior to the distribution and not necessary to show the amount of the distribution. Actual evidence of the distribution I would advise be kept FOREVER - just because of this very situation....

As far as someone who hasn't kept the records - I'd suggest seeing what it would take to recreate them, or start talking "settlement."

[austin3515]

Oh yeah, absolutely MoJo. Will call the participant today and see if they would accept $10,000 just to leave us alone. That would be a terrific precedent to set...

[My 2 cents]

Oh yeah, absolutely MoJo. Will call the participant today and see if they would accept $10,000 just to leave us alone. That would be a terrific precedent to set...

Agreed. One has to presume that if that person was paid out 20 years ago and the employer lacks records to prove it, the same would be true for everyone else who was paid out back then. The line forms outside HR!

Also, don't forget that the obligation to pay would be the plan's, not the employer's. Didn't I see some sort of court case a year or two ago that indicated that the money would have to be taken from everyone else's account?

[Belgarath]

Let me start by saying I have absolutely no knowledge of the legal arguments or principles involved, so I cheerfully defer to the attorneys.

It seems, however, that it is pretty hard for a participant to "prove" that they never received payment. It would seem to me that once the participant claims that they were never paid, the burden of proof rests on the plan, to prove that payment WAS in fact made? And perhaps there are all sort of applicable statutes of limitations, court precedents, etc., etc., that can be used to negate or overcome that burden if a certain amount of time has passed, or whatever?

And I'm probably COMPLETELY off base in my thinking.

[david rigby]

Don't overlook the possibility that this person was never paid. (In general, there are only 2 possible answers.)
Perhaps "purged" after unsuccessful attempts to locate? Hey, it's possible.

Find out the approximate timeframe. Then start looking for evidence (older plan records, cancelled check, Schedule SSA, etc.) This might require action to identify a previous record-keeper and/or trustee.

[jpod]

Austin, how big is the employer and is the same management in place now as in 1993, or can 1993 management be contacted? What I am driving at is that someone in a position to have known may remember that this person was absolutely paid ($30K is not chump change and suggests that the participant was employed for at least a couple of years or perhaps many years). This person may remember well enough to be willing to testify to that effect if the need ever arises, but even better that person may be able to think of something that will lead you to some form of documentary evidence.

[austin3515]

LEt me be clear. There are no files. There are no memories beyond actually remembering the person. There is no one who will testify. I'm sure the owners would testify that they would not have forfeited the money.

[jpod]

Austin, you asked for suggestions. If you don't want any more just say so. The only one worth repeating is that the plan sponsor should retain counsel to get advice on what to say or not say to this person.

[austin3515]

Sorry, but it just seems like some of the "suggestions" (such as the forever standard, remembering obsure details from decades ago that people would be willing to testify to under oath no less) while they are commendable in a utopian world, are just not practical. I swear if Microsoft got this question they would say to the participant "Are you kidding me??" and promptly hang up on them.

I'll tell you what, one of these days I'm going to call the big 5 accounting firm I worked for when I graduated and ask them for my money and see what they say! I took the distribution in 2000... Better yet, I'll wait 10 years and give it a shot...

[Belgarath]

Well, it is an ERISA plan, so there is a formal procedure involved for denying a claim for benefits. I don't believe a simple "We don't have it" will qualify. At the very least, the plan must follow the formal plan procedures as outlined in the Plan/SPD, although if the claim is not made in writing, I don't know if that negates the participant's rights, or partially negates them, etc.

If the appropriate procedure is not followed, it may result in unfavorable results for the Fiduciaries/Administrator if the participant decides to bring a lawsuit.

I have to agree with Jpod that at the very least, this should be discussed with counsel prior to the formal or informal rejection, as it is obvious that the plan has not encountered this situation before.

[MoJo]

Oh yeah, absolutely MoJo. Will call the participant today and see if they would accept $10,000 just to leave us alone. That would be a terrific precedent to set...

The problem here is that it is the PLAN'S responsibility to maintain the records - NOT the participants.... Every controversy requires a cost/benefit analysis to determine what is the most efficient outcome. I'm not saying just make an offer. I'm saying figure out what are the reasonable outcomes, what are the risks, and make a business decision....

Whether paying someone off sets a bad precedent or not is irrelevant (as is your snarky attitude). Plan has an OBLIGATION to maintain records. Plan did not. Plan may suffer consequences. The question is the best course of action to resolve it. There are three - find or recreate the records, settle the matter, or stick your head in the sand (or elsewhere) and wait for Schlicter {or another attorney) to come a calling....

[MoJo]

Sorry, but it just seems like some of the "suggestions" (such as the forever standard,...

I swear if Microsoft got this question they would say to the participant "Are you kidding me??" and promptly hang up on them.

First, the "forever" standard is part of ERISA - maintain records as long as necessary to determine benefits payable - and frankly, it isn't that burdensome. Buy another hard drive or rent some cloud space on another server.

As far as Softie is concerned - I'm on a panel with their director of retirement benefits at an upcoming conference. They *have* every record from day one and employee one. I asked....

[austin3515]

"First, the "forever" standard is part of ERISA - maintain records as long as necessary to determine benefits payable - and frankly, it isn't that burdensome"

:P :P :P

(now that is snarky!)

[GMK]

From this plan sponsor's point of view, the only burden, if you can call it that, is finding an appropriate place to store files (pretty easy) and not throwing the files away (easier still).

That's been far less burdensome than if we had not had answers for former participants who have asked about whether they still have some benefit coming.

[austin3515]

I speak for "the people" and that is all I will say about that.

[My 2 cents]

"First, the "forever" standard is part of ERISA - maintain records as long as necessary to determine benefits payable - and frankly, it isn't that burdensome. Buy another hard drive or rent some cloud space on another server."

Sure, easy to say now! We are all talking about something that happened (or, possibly, didn't happen) 20 years ago. Back then, computers had hard drives that could hold 20 megabytes (soon to jump to over 100!), and the only clouds were in the sky (and, depending on the season, might rain or snow). If you tried hard enough, you could save documents on floppy discs that held 1.4 megabytes of data. Most records then were kept on paper.

So if the employer wanted to keep complete records forever but 18 years ago they were all destroyed in a flood or fire, how does the employer prove that the person has already been paid? And is "forever" forever when someone's benefit was already paid out?

[ESOP Guy]

To be fair the forever standard to determine benefits payable for a DC plan could be as little as a copy of the 1099-R once paid. Presumably if not paid they are still on the record-keeping system.

A DB plan strikes me as more difficult as you could be asked to keep pay records to prove a person's highest 5 year average for example.

As a practical matter I am mostly on Austin's side of this. The large TPA firms I worked for kept those records forever as they could afford it and spend the costs out over many clients. The smaller TPA firms I worked for I don't think ever kept the records forever. The costs of offsite storage back in the paper days was too high. So once the onsite storage had to be cleaned it got cleaned.

Add to it if there was a TPA change things got complex fast. I did conversion of 401(k) plans in the '90s that within 60 days of the client no longer being the former TPA's client they said the records were gone. Maybe that was a line but you never got anything from them after that time frame. This was true even if the client offered to pay.

[GMK]

Relax, folks. The forever standard applies to plan sponsors, yes?

TPA's pitch stuff as they wish or need to, unless they've agreed to something in their contract with the plan sponsor, or they do fiduciary things and want to cover their own butts.

[K2retire]

Relax, folks. The forever standard applies to plan sponsors, yes?

TPA's pitch stuff as they wish or need to, unless they've agreed to something in their contract with the plan sponsor, or they do fiduciary things and want to cover their own butts.

Yep, we used to send terminating clients a letter reminding them that they had received all of the records from us (on paper) and if they needed additional copies they needed to contact us within a specific time period. After that, our records would be purged. Although I think we actually kept them longer than we told the clients.

[ESOP Guy]

We understand the rule doesn't apply to TPAs but that doesn't stop the plan sponsors to come knocking on Austin's door looking for answers as proven by this thread.

(And it is all about Austin at this point! )

[PFranckowiak]

I have asked participants to look for past copies of their tax returns for a copy of the 1099R. Sometimes people have kept stuff that long. I think it's the problem with the SSA and not taking a participant off when they were paid out. I did have a partiicipant find the 1099R and that solved the problem. Not sure if IRS keeps copies of 1099R. Could contact the DOL and not tell them the clients name and ask if they have any suggestions on how to get past records.

[PFranckowiak]

We don't pitch stuff - we box it up and drop it off at the clients and telll them they need to keep it. I keep for several years past when we lose a client and then we box it up and give it to them.

[My 2 cents]

I have asked participants to look for past copies of their tax returns for a copy of the 1099R. Sometimes people have kept stuff that long. I think it's the problem with the SSA and not taking a participant off when they were paid out. I did have a partiicipant find the 1099R and that solved the problem. Not sure if IRS keeps copies of 1099R. Could contact the DOL and not tell them the clients name and ask if they have any suggestions on how to get past records.

The participant found the 1099R and shared it with the plan?? Whose side were they on? Let it be understood, however, that I certainly agree it was the right thing to do.

[austin3515]

That's what I was thinking too... The participant could easily say "great idea! let me check!" and then come back and say "see I told you I never got the money, I could not find that 1099-R!"

[Belgarath]

There really are a lot of people out there who only want what is right and fair. Of course, none of them are in politics...

[chc93]

Just curious... assume plan sponsor closes the business (also terminated the plan). Who, then, keeps the records "forever". Does the plan sponsor still have to keep records "forever"? And what about plan sponsors that close their business, retires and/or eventually dies. How long is "forever"?

[MoJo]

"First, the "forever" standard is part of ERISA - maintain records as long as necessary to determine benefits payable - and frankly, it isn't that burdensome"

:P :P :P

(now that is snarky!)

With all due respect Austin, if you are in business and you can't or won't comply with the LAW, then you don't deserve to be in business. That applies across the board.

[austin3515]

Ahhh, now I see the confusion. I am in the business, and all of our work since I started 10 years ago is scanned on the network. Several years of stuff before that is in boxes. We have often discussed what to do with it and always decided as you said it isn't that burdensome to keep it. Of course I can't say the same for our newer clients with respect to their pre-Austin Powers vendors.

I'm not talking about me though. I'm talking about my clients, some of whom for example are in a different profession altogether. They are more focused on meeting payroll this week, or juggling uncooperative vendors, or hiring enough people to fill their orders. Perhaps this year they are tying deal with ACA. I think in general you represent the Fortune 500 type of clients (and we're all very impressed) with robust HR departments and do not take into consideration the "little people" that I represent. And some of them have the great misfortune of establishing a plan decades ago, and changing vendors periodically for the benefit of their participants. That is certainly the unfortunate position in which my current client finds itself.

[jpod]

This has evolved (devolved?) into something like last night's debate. Austin, the past is the past and all of your points are understood. If this was a $5,000 matter I would advise your client to ignore it. Since as I said it could be more like $75,000 with hypothetical lost earnings, your client should confer with an ERISA attorney with some litigation sensitivity to figure out what to do, including what to say and not say to this person.

[austin3515]

I have discussed that with the client (inspired by your original post actually). I think it is sound advice. I hope they take it... As someone mentioned we do get these a lot from those crazy SSA filings and "sorry, you must have closed your account years ago" has been an effective response.

[MoJo]

I'm not talking about me though. I'm talking about my clients, some of whom for example are in a different profession altogether. They are more focused on meeting payroll this week, or juggling uncooperative vendors, or hiring enough people to fill their orders. Perhaps this year they are tying deal with ACA. I think in general you represent the Fortune 500 type of clients (and we're all very impressed) with robust HR departments and do not take into consideration the "little people" that I represent. And some of them have the great misfortune of establishing a plan decades ago, and changing vendors periodically for the benefit of their participants. That is certainly the unfortunate position in which my current client finds itself.

Actually, Austin, I represent the small to mid-market clients, and my comment still stands. If a company can't or won't comply with the law, then it isn't a viable business. That's why they hire people like you and me - to let them know what the requirements are, and to help them to comply. Those that don't need to know that there are consequences - and frankly, shouldn't be doing things if they can't do them right. Saving the business by cutting corners is simply not a viable business model.

Now, there are companies that have been ill-advised over the years, and if they are willing to make it right, I'm all in trying to help them - BUT NEVER WILL I WORK WITH A CLIENT THAT SEEMS TO THINK THAT THEY CAN JUST IGNORE THE ISSUES AND RUN THE RISK OF GETTING CAUGHT. Because they will get caught. At times, I've even turned them in (and no, I don't break "attorney client" privelege - I've only done it where there wasn't an attorney-client relationship).

Do it right, or don't do it.

That applies to service providers as well....