Missing payroll records for 9 years

I have a question that I do not believe I have tackled before and need some help. A large client with a 401k plan has a subsidiary that is an adopting employer they acquired in 2009 it appears. We are being told that they do not have any payroll records for this location prior to 2013. They now have to process a distribution request for an employee with service from 2004 - 2014. They have 2013 - 2014 but missing payroll from 2004 - 2012. They need to determine the participant's vesting for years prior to 2013 and want us to come up with a clever assumption.

My first thought is do they not have Human Resources rules to follow or conduct like going to the IRS for copies of prior W-2's? Is there not something they need to do legally? Other than that, all I could suggest is to use elapsed time for 2004 - 2012 and grant 9 years of vesting service and the participant will be 100% vested. And then do the same thing for all other affected participants.

Any input of thoughts would be great especially if there is HR steps that I should tell them they need to do first.

Thanks!

I would assume the same. The plan sponsor is responsible for maintaining sufficient records - payroll, HR, etc. - to determine whether a participant is entitled to a benefit. Failure to do so should always be resolved in the participant's favor and there have been court cases that have ruled as such. This is also clearly a fiduciary duty on which they have fallen woefully short.

what is the vesting schedule and does 2013-2014 show that they worked full time hours?  Is their age such that during the time period missing that they would have been an adult vs student/intern?

I agree in trying to get W-2 copies from the IRS, but depending on the vesting schedule, I'd err on the side of 10 yrs service.

eta: unfortunately from a payroll perspective, many are told they only need to keep payroll records 2-3 years for wage or discrimination claims and they forget about retirement plan needs....

I think if truly we cannot find any payroll or service information then 100% vesting as a certain date may be best?

We recently had somewhat of a similar issue.  Can someone at the subsidiary "say" that this employee "generally" worked full-time, or near full-time?  Or is this employee very part-time,  or essentially on-call.  Then give the most generous vesting from what can be gleaned.   If employment goes back to 2004, someone must have known this person through most, if not, all years.

If the missing service records are for periods before the subsidiary adopted the plan, 2530.200b-3(b) describes options for making reasonable estimates.  For periods after they adopted the plan, if they don't have service records, they need to apply the equivalency method specified by the plan. 

2530.200b-3 says:

" ...  If, however, existing records do not accurately reflect the actual number of hours of service with which an employee is entitled to be credited, a plan must either develop and maintain adequate records or use one of the permitted equivalencies. ..."

There are several equivalency methods listed in the reg. It also says in (c)(1) that any equivalency method used by the plan needs to be set forth in the plan document. 

Thank you very much!