Welfare Benefit Plan Documentation Requirements - NAHU Convention - Final Version

Presented By: Trey Tompkins, JD, MBAPresident, Admin America, Inc.

2015 NAHU National ConventionNew Orleans, Louisiana

June 2015

Document Retention Requirements For Welfare Benefit Plans

Legal Disclaimer

The information presented and contained within this document is provided as general information only, and does not, and is not intended to constitute legal advice.

Any opinions expressed within this document or presented along with the document are solely the opinion of the presenter and may not reflect the opinions of Admin America, Inc. or the National Association of Health Underwriters or any other personnel affiliated or employed by either entity.

About Your Presenter: Trey Tompkins

•President of Admin America, Inc.

• Independent TPA based in Alpharetta, Georgia

• Specializing in FSA, HRA, HSA and COBRA Administration

• Also consults on PPACA, ERISA and HIPAA compliance

•19 Years Employee Benefits Consulting Experience

•Member of NAHU’s National Legislative Council

• Co-Chair of Council’s Compliance Corner Sub-Committee

• Former President of NAHU’s Atlanta and Georgia Chapters

•Member of the State Bar of Georgia

• Graduate of Vanderbilt University, the University of Georgia School of Law and Georgia State University College of Business

Who What Where When Why How

Welfare Benefit Plan Document Retention Requirements

Fundamental Principle

• Keep Records Long Enough To Get Out of Trouble If Someone Accuses A Plan of Misbehavior

•What Are A Plan’s Obligations?• How Could The Plan Misbehave?• How Could You Prove The Plan Behaved?• How Long Does Someone Have To Bring An

Accusation of Misbehavior?The Relevant Statute of Limitations

What Is A Welfare Benefit Plan?

Employer Sponsored Benefits (other than Pension or Retirement Benefits)

• Major Medical Insurance• Dental Insurance• Disability Plans• Life Insurance• Health FSAs• Transportation Plans

• Adoption Assistance Programs• Vacation Benefits• Child Care Benefits• EAPs• Holiday Pay Benefits

Sources of Welfare Benefit PlanDocument Retention Requirements

• Statutory & Regulatory Rules• Primarily Federal• ERISA Pre-emption reduces but does not

eliminate role of State authority• Tax and Payroll Regulations• Insurance Regulations

• Litigation & Investigative Related Rules• Both State and Federal• Statutes of Limitations drive recordkeeping

Important Statutory Recordkeeping Rule Sources

• Fringe Benefits• Federal Excise Taxes• Sarbanes-Oxley

• ERISA• HIPAA• FMLA• Income &

Employment Taxes




Employment Taxes

Which Welfare Benefit PlansAre Subject to ERISA?

All Employee Welfare Benefit Plans Except:

1. Government and Church Plans

2. Plans Established To Comply With State Law

3. “Payroll Practice Exemptions”

4. “Voluntary Employee-Pay-All” Plans

Who Is Responsible For Retaining ERISA Related Documents?

•Every “Person” who is required:• to file “any report” under ERISA; or• to certify any information for such report• Forms 5500 are the primary report

• Types of Persons• Plan Administrators• DFEs (Direct Filing Entities – MEWAs)• Third-Party Vendors (Insurers, Banks,

Accountants)

What Types of ERISA Documentation Responsibilities Can Be Shifted To Third-Party Vendors?

• Generally, ERISA record keeping liabilities can not be delegated or avoided by contract

• Exception for Successor Plan Administrators• Successor Administrator must agree to

maintain records for full period• Predecessor Administrator must retain list

of transferred records

Types of ERISA Non-Compliance Penalties

• No statutory penalties• Fiduciary liability including possible removal• Criminal penalties for willful violations• $100,000 maximum fine for person• $500,000 maximum fine for company• 10 years maximum imprisonment• Additional criminal penalties for concealing

material information about plans

ERISA Document Retention Requirements

• Requires maintenance of records sufficient to document information that is required by Form 5500

• Includes records that substantiate any information required by the Form 5500

• Applies even if Plan is entitled to Form 5500 reporting exemption

• Requires retention for 6 years from when Form 5500 is filed (or would have been absent an exemption)

Which Welfare Benefit PlansAre Also Group Health Plans?

Employee Welfare Benefit Plans That:

1. Provide Medical Care

2. To Employees or Their Dependents

3. Through Insurance or Otherwise




Employment Taxes

HIPAA Document Retention Requirements

• HIPAA Privacy Rule requires “Covered Entities” to maintain records of:• the Plan’s Privacy Policies and Procedures• any communication the HIPAA Privacy Rule;

requires to be in writing; and• documentation regarding impermissible uses

or disclosures of unsecured PHI• records of breach notifications• determination that no breach requiring a

disclosure had occurred


• HIPAA Security Rule requires “Covered Entities” and “Business Associates” to maintain records of:• their Security Policies and Procedures; and

• any action or assessment that the HIPAA Security Rule requires to be in writing


• HIPAA Privacy and Security Rules require documentation to be maintained for six years.• Period runs from the later of the date the

document was created or the last date it was in effect.




Employment Taxes

FMLA Document Retention Requirements

• FMLA covered Employers with eligible employees must retain• Basic payroll and employee ID data• Dates and/or hours FMLA leave is taken• Notice(s) to and from Employee• Descriptions of FMLA affected benefits

• Records must be retained for three years




Employment Taxes

Who Is Responsible For Retaining Income & Employment Tax Related Documents?

• Anyone subject to income or employment taxes

• Anyone required to file “returns of information with respect to income”

Which Welfare Benefit PlansAre Subject Income Tax Rules?

• W-2 reportable benefits• Payroll, Vacation Pay, Bonuses

• Tax-favored payments• Expense reimbursements

• Wage related benefits (State laws)• Items exempt from SUTA laws

Income Tax Law Document Retention Requirements

• “Permanent books of account or records” sufficient to establish any amount or other information required to be shown on the return• Records must be kept until the passage of the

relevant tax statute-of-limitations• Generally three years from filing of return• Six years if tax is understated by 25% or more• No statute of limitations for failure to file

Employment Tax Law Document Retention Requirements

• FICA and Medicare Taxes• Records of compensation paid • Includes support for any compensation that is

treated as nontaxable• Premium Only Plan records

• Records must be kept for four years after the later of the date the tax is due or the tax is paid• Can be simplified to a five year holding period

Non-Compliance Penalties For Income & Employment Tax Record Failures

• Statutory penalties for failure to issue W2s• to employees by January 31 • file them with the IRS by March 31

• Failure to properly document exempt income may result in loss of exemption

• Income record failures could lead to denial of deductions for business expenses




Employment Taxes

Fringe Benefit Law Related Document Retention Requirements

• Code Section 6039D requires “Specified Fringe Benefit Plans” to keep records “as may be necessary” to determine whether the specific plan met the Code’s requirements for exemption for that benefit

• Records must be kept four years after due date for the tax return for the period to which the records relate

• Five year retention period simplifies the calculation

Fringe Benefit Law Related Document Retention Requirements

• “Specified Fringe Benefits” include:• Employer paid life, health and disability plans• Section 125 Pre-Tax Salary Redirection Plans• DCAPs• Employee Education Assistance Plans

• Code 6039D requires filing information returns but requirement was suspended by IRS in Notice 2002-24.

• i.e., Form 5500s for Section 125 POP Plans




Employment Taxes

Federal Excise Tax Related Document Retention Requirements

• Sections 4980B and 4980D impose potential taxes of $100/day/individual on Plans

• Penalties do not apply to government plans

• These taxes require self-reporting of liability

• Records related to these taxes must be held for three years from the later of the date the related tax return due or it is filed• No statute of limitation if return is not filed

Federal Excise Tax Related Document Retention Requirements

• Federal Excise Taxes include liability for Group Health Plan’s failure to comply with:• COBRA • ACA Group Health Plan Mandates•Mental Health Parity• GINA• HIPAA Portability provisions• HSA Comparability rules




Employment Taxes

Sarbanes-Oxley Document Retention Requirements

•Mandatory only for publicly traded companies

•Many larger privately held companies have voluntarily adopted its rules as “best practices”• Useful if trying to sell out to Public company

• Involves financial accounting, disclosure, audits, conflicts of interest and governance issues


• Requires auditors to maintain records for seven years from conclusion of an audit or review

• Includes all records which form the basis of an audit or review or that are produced as a result of the audit or review

• Such documents will often include information regarding a company’s welfare benefit plans


• Section 302 places personal criminal responsibility on a company’s CEO and CFO• Includes responsibility for the efficacy of the

financial controls of service providers to whom they outsource financial services• This can include large welfare benefit plans• Oversight can include directly evaluating an

outside vendor’s internal controls or relying on a vendor’s SAS 70 auditor’s report

Penalties for Violations of Sarbanes-Oxley

• Criminal penalties for willful destruction of audit records• Up to 10 years in prison• Up to 20 years if intent is to impair the

documents use in an official proceeding• CEOs and CFOs are subject to criminal penalties

for knowingly certifying inaccurate or insufficiently vetted information in a SEC filing• Up to 10 years in prison• Up to $1 Million in fines

Litigation Related Requirements

• Record keeping duration typically hinges on applicable statute of limitations• Federal law may specify a limit but often

does not and therefore state law applies• Can also modify length of limitation period

by terms of the Plan in many cases•Modification must be reasonable• Often based on Plan’s home state when

benefits are provided in multiple states

Litigation Related Requirements

Statutes of Limitation for Various Litigation • ERISA Breach of Fiduciary Duty (3 or 6 years)• ERISA Benefit Denial Claims (state law)•Maryland (3 years), Kentucky (15 years)

• ERISA Civil Penalty Claims (state law – various)• Claims for COBRA coverage (state law)• Unfair insurance-related practices (2 years)• Economic damages (6 years)

•Medicare Claims Under MSP Rules (3 years)

Types of Records To Retain

• Claims Records• Individual Participant

Communications• Financial Records• Form 5500 and other

government filings• Non-discrimination testing

records• Litigation & government

investigation records

•Plan Documents and other governance instruments• SPDs and other general

participant communications•Eligibility, Election &

Enrollment Records









Enrollment Records

Plan Documents and Other Governance Instruments

• ERISA requires that employee benefits be “established and maintained pursuant to a written instrument”• Non-ERISA fringe benefits generally require

written documents as a condition of their tax exempt status• Plan Documents are important evidence

that the plan’s terms and conditions meet all applicable legal requirements

Plan Documents and Other Governance Instruments

• ERISA does not dictate the form a PD must be in but ERISA does require certain inclusion of certain items• Insurance contracts typically contain

most but not all of the required info• “Wrap Documents” are often used to

provide the additional information• Plan Administrator• Eligibility Rules• Subrogation Provisions









Enrollment Records

SPDs and Other General Participant Communications

• ERISA and other rules require various disclosures to Participants

•Many of the disclosures can be generalized for all applicable Participants• COBRA Initial Notices• Summary Plan Descriptions• HIPAA Privacy Rights Notices•Medicare Part D Creditable Coverage Notices









Enrollment Records

Eligibility, Election & Enrollment Records

Employers Should Retain Eligibility Records:• Identifying Individuals as Employees• Supporting Service & other Eligibility Rules• Relating to Employer Mandate Status• Relating to Eligibility for Fringe Benefits• Relating to Spouse and Dependent Eligibility• Communications with Insurers

Eligibility, Election & Enrollment Records

Election & Enrollment RecordsEmployers Should Retain:

(Length of Retention based on benefit type)• Employee Enrollments Under ERISA Plans• Salary Reduction Agreements• Change of Election Forms• Insurance Applications• Beneficiary Designations









Enrollment Records

Claims Records

• Must be retained for Plans that have a claims related Form 5500 reporting obligation • Would include several types of welfare plans:• Funded plans with VEBAs• Insured plans with experience-rated contracts• Plans with participant contributions with some

exceptions• Insured plans without experience-rated contracts

should not need to hold claims records for ERISA purposes but will for litigation purposes

Claims Records

Claims Records That Plans Should Retain:• Documentation of Claims Procedures• Standard Claim and Appeal Forms• Other Rules and Criteria Regarding Benefits• Documentation of Decision Periods• Administrative Safeguards to Insure

Consistency of Claim Adjudication• Benefit Approval and Payment Records• Benefit Denials• Benefit Appeals









Enrollment Records

Individual Participant Communications

Individual Communications RecordsThat Plans Should Retain:

• Evidence of Proper Document Distribution• Responses to ERISA Requests for Documents• Benefit Claim and Appeals communications• COBRA and USERRA rights communications• FMLA communications• HIPAA communications (portability & privacy)• Form 1095-B and 1095-C statements•W2s









Enrollment Records

Financial Records

Financial Records That Plans Should Retain:• Premium and Benefit Payments• Proof of Exemption from ERISA Trust Rules• ERISA Trust Records (if applicable)• Administrative Expense Records • Records of Payments to Other Third Parties• Plan Asset Records Including Recovery of Funds• Plan Termination and Business Reorganizations• Fidelity Bonds and Fiduciary Insurance• Salary Reduction Records









Enrollment Records

Form 5500 and Other Government Filings

Records That Plans Should Retain:• Substantiation of Form 5500 Exemption• Participant counts on first day of Plan Year• Unfunded, Insured & Cafeteria Plan status

• Substantiation of Number of Plans Sponsored• Substantiation of Participant Counts (PCORI)• Proof of Filing (Retain Permanently)• Substantiation of Other Information in Filing

Exemption Records Should Be Kept Permanently; 5500 Info for Eight Years




government filings• Non-discrimination

testing records• Litigation & government




Enrollment Records

Non-Discrimination Testing Records

Records That Plans Should Retain:• Cafeteria Plan Tests (3)• Health FSA & HRA Tests (2)• DCAP Tests (4)• Qualified Education Assistance Tests (2)• Qualified Adoption Assistance Tests (2)• Group Term Life Insurance Tests (2)• HSA Comparable Contribution Info

Records should be retained for five years (based on the Employment Tax S.O.L.)









Enrollment Records

Litigation and GovernmentInvestigation Records

• Legal counsel should always be consulted about the holding period in these situations• Situations to consider• Self-Audits• DOL Investigations of ERISA Plans• DOL Correction Filings• IRS Audits of Cafeteria Plans

Special Record Keeping Issues To Consider

• Records Held By Third Party Providers

• Electronic vs. Paper Retention

Records Held By Third Party Providers

• Selection and Monitoring of Third Party providers is an ERISA Fiduciary responsibility

•Written service agreements with Third Party providers should accurately reflect the Plan’s needs and the provider’s responsibilities

• Agreement must preserve Plan Sponsor’s right to access Plan Data after the business relationship ends

Electronic vs. Paper Retention

• Electronic Records must be Authentic, Accessible & Readable• Paper originals may be destroyed if Electronic

Record requirements are met• Common Problems to watch out for• Inability of Plan Sponsor to get data

requested by auditor from TPA • Loss of record access from TPA or software

vendor at end of business relationship

Records Held By Third Party Providers

•Written service agreements with Third Party providers should identify:• the records to be created and stored by the

service provider• ownership of the Plan’s records• Plan Sponsor’s access to records• Retention rules to be followed by provider• Retention technology to be used

Questions?Trey Tompkins, JD, MBAPresident – Admin America, Inc.

[email protected]

Direct (678) 578-4625Mobile (404) 915-2004

Admin AmericaP.O. Box 1209Alpharetta, Georgia 30009