The GenCorp1 case is a good example of the risks associated with an inadequate document retention policy. In this instance, the employee involved worked for the employer from 1946 to 1967. In 1992, when she turned 65, she asked the plan administrator to pay her a pension, but the latter no longer had any records of her membership. The administrator's policy had been to destroy an employee file 20 years after termination if no pension was payable. Based on this policy, the administrator turned down her request on the basis that if she had in fact been entitled to a pension, it would have kept a record.
The employee proved that she had met all of the prerequisites for entitlement to a deferred pension when she was terminated. The administrator, on the other hand, could not prove that she had not met the conditions or that a payment had been made. As the administrator could not refute the employee's allegations, it was forced to recognize her entitlement to a pension.
A robust document retention policy enables administrators to mount an effective defence against some claims. In the Desjardins2 case, for example, an administrator was sued in 2006 on the basis of alleged breaches of its duty to provide information to members in 1985-1986 and 1993. The claimants alleged that the administrator had failed to inform them of some features of their plan and, as a result, they had made unfavourable decisions.
Because the administrator had strong documentary evidence, it was able to show that the allegations were without merit. Among other things, the administrator had kept copies of communications sent to employees during the relevant periods (including the means of transmission), along with details on information sessions offered (dates, attendance lists and presentation files). These documents allowed the court to conclude that the required information had in fact been provided and that the administrator had fulfilled its fiduciary duties.
These cases show how important it is to maintain complete records for several decades, even though the task may, as a matter of first impression, seem burdensome and perhaps even pointless. The administrator may otherwise end up without credible evidence to support its defence.
Some helpful tips
The first question that comes to mind when drafting a document retention policy is: what do we keep, and for how long? It is important to put together a policy tailored to each plan. However, some broad principles should be respected in each case.
- The policy must be well documented and, at a minimum, contain a description of the documents to be kept and for how long. The policy must include procedures to ensure that the policy is implemented.
- The documents that create and support the plan must be kept indefinitely. These documents include the plan texts and amendments, trust agreements, communications with employees, collective agreements, etc.
- As long as a person has an entitlement under the plan, the administrator must keep all information regarding that person which could be needed to deal with issues pertaining to his or her entitlements and the form or amount of benefits.
- When entitlements are discharged or a benefit is no longer in payment, the administrator must indefinitely keep a summary of the member’s or beneficiary’s file (including personal information, amount of the benefit paid and reasons for closing the file).
- In all cases, the collection, use and retention of personal information must comply with the requirements of applicable privacy legislation.
- The administrator must keep other documents pertaining to the plan administration, including agreements with service providers, reports, etc. The administrator must decide on a case-by-case basis if such documents must be kept and for how long. It is generally prudent to keep them for at least three years after they are issued or after the contract termination date.
- Plan-related documents can be kept in paper format or electronically. Québec law recognizes that electronic documents whose integrity is protected have the same evidentiary value as paper documents.
Good document management practices are essential in allowing an administrator to demonstrate it has acted prudently, diligently and competently in the best interest of members. Therefore, plan administrators must not only adopt a document retention policy, they must also revise it from time to time, to ensure it is still suited to the plans involved. As the summer is usually a quieter time, it could be the perfect moment to review your policy and your retention practices.
Originally published in the June 2014 issue of Avantages.
1 GenCorp Canada Inc. v. U.R.W., Local 455 (1993), 38 L.A.C. (4th) 203.
2 Desjardins c. General Motors du Canada ltée, 2009 QCCS 1200.