Client faces audit and can't locate prior plan records...

[Guest RBeck]

I have a situation where a client is facing an audit and cannot locate copies of any documents prior to the current financial institution standardized document, adopted 6/1/97, which shows an original plan effective date of 5/31/85. in short, the "historical" documents can't be found, and there's no indication that a determination letter was applied for or received. Is there any recourse in arguing that ERISA section 107(106?) states that plan records need only be maintained for a 6 year period?

[Guest Laura]

depends on who's auditing your client. if its an IRS audit, the ERISA argument regarding record retention is irrelevant. i have heard the argument, however, that there is no tax code or regulatory requirement that there be an executed plan document (other than for 401k plans). not the strongest argument in light of 401(B).

if its a DOL audit, you still have a problem because all ERISA plans require a "writing." worse yet, if the plan fiduciaries are operating without a writing, they're going to have a hard time enforcing, for example, a waiting period for participation, a vesting schedule, etc. enforcement of such a provision could be construed as arbitrary and capricious absent a writing.

In terms of constructive suggestions, if its a prototype plan, you might tell your client to ask the prototype sponsor. also, the trustee should have a copy of the plan and trust on file.

good luck...

[Alf]

I agree that someone (most likely the client) has a copy of the documents somewhere.

The IRS apparently can search for determination letters and let you know if the plan ever got one. You should also be able to tell from the 5500 responses.

As far as prior plan document, you shouldn't need to refer to the terms for anything, so it should be enough to be able to prove that something was adopted. I would have the client dig through their board book to find the original authorization for the adoption of the plan (assuming the client hasn't lost all of its corporate records).

[Guest RBeck]

So, no easy solution. It's an IRS audit, and having been through several, recently, I know I'm not in for an easy time if my client can't find the prior records. Thanks for the suggestions!