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Businesses Must Retain Records for Specific Time Periods to Comply with Regulations

In order to ensure compliance with various regulations, businesses are required to retain certain records for specific time periods. Failure to do so can result in fines and penalties.

Employee Benefit Plan Records

According to a recent report, employee benefit plan records must be retained permanently, including:

  • Actuarial reports
  • Financial statements
  • Information returns (Form 5500)
  • Allocation and compliance testing documents
  • Brokerage/trustee statements supporting investments

Plan and trust agreements, internal revenue service/department of labor correspondence, and participant communications related to distribution, termination, and beneficiaries must also be retained permanently.

Insurance Records

Insurance records have a shorter retention period:

  • Accident reports and settled claims: 6 years after settlement
  • Fire inspection and safety reports: 7 years
  • Insurance policies (still in effect): permanent
  • Expired insurance policies: 7 years

Legal documents, including:

  • Articles of incorporation and bylaws
  • Buy-sell agreements
  • Contracts and leases (still in effect)
  • Employment agreements

must also be retained permanently. Minutes, partnership agreements, stock certificates and ledgers, and legal correspondence must also be kept indefinitely.

Guidelines for Record Retention

The following guidelines should be used as a general guide:

  • 7 years following disposition, termination, or pay-off
  • Consult with an attorney and insurance carrier when establishing a record retention policy
  • Review and update the record retention policy annually to ensure compliance with changing regulations and professional requirements

By understanding these retention periods and guidelines, businesses can ensure they are in compliance with regulations and avoid potential fines and penalties.

Individuals Also Required to Retain Certain Records

In addition to businesses, individuals are also required to retain certain records for specific time periods. These records include:

  • 401K/Keogh statements
  • Annuity year-end statements
  • Bank statements
  • Birth and death certificates
  • Cancelled checks
  • Certificates of deposit statements

The retention period for these records varies, with some documents requiring permanent retention and others only needing to be kept for a few years. Individuals are advised to review their record retention policies annually and update them as necessary to ensure compliance with changing regulations and professional requirements.

Conclusion

In conclusion, businesses and individuals alike are required to retain certain records for specific time periods to comply with regulations. Failure to do so can result in fines and penalties. By understanding these retention periods and guidelines, businesses and individuals can ensure they are in compliance and avoid potential consequences.