Working on an IRS audit is hard enough. But what’s even harder? When you discover the plan sponsor disposed of—or claims to have disposed of, the very records the IRS is demanding.
Let’s not kid ourselves: that’s a hostage to fortune. You can’t defend what you can’t prove. And you can’t explain away a missing spreadsheet from 2015 just because “we thought we didn’t need it anymore.” That’s not a defense, it’s an admission of negligence.
Here’s the cold, simple truth:
1. Plan sponsors have to keep the records. The IRS, under the retirement plan rules, requires you to furnish complete, accurate records — in paper or electronic form — when asked.
2. Some records must live forever (or close to it). ERISA doesn’t just say “six years and toss the rest.” Under § 209, you must keep whatever records are necessary to determine a participant’s benefit—because benefits last a lifetime.
3. You can’t rely on your service provider to fix your mess. Even if you’re using a great TPA or administrator, the legal obligation rests squarely on you (the sponsor). If they purge or misplace records, you’re still on the hook.
4. “We destroyed it” won’t cut it. If you destroyed records you were legally required to preserve, that invites the IRS (or DOL) to assume the worst. For missing records, the burden often shifts to you, prove a negative.
5. The remedy is always: don’t let this happen in the first place. A written records-retention policy. Regular backups. Migrations when switching providers. Indexing. Document control. All that boring but essential stuff.
Bottom line (no fluff): If you’re a plan sponsor and you have been lax about recordkeeping — and now you’re facing an IRS audit, you’re already behind. The only hope is that you have partial records, internal logs, or corroborating evidence. But don’t count on miracles.
If your plan is still relatively clean, double down now. Clean up your document retention policy. Audit your backups. Make sure nothing gets tossed unless you can legally toss it. Because in an audit, the IRS doesn’t want excuses. They want proof.
