Pennsylvania Bulletin

PA Bulletin, Doc. No. 00-1008

NOTICES

Guidelines for Record Retention; No. 2000-07

[30 Pa.B. 2968]

   This notice supersedes Insurance Department (Department) notice nos. 1994-01 and 1994-18 relating to guidelines for retention of records by insurers and other entities subject to examination by the Department. The Department has issued this notice to consolidate and update the guidance provided in the 1994 notices. This notice and accompanying Record Retention Guidelines (Guidelines) are intended to assist insurers and other examinees in establishing appropriate record retention procedures for purposes of examinations by the Department under Article IX of The Insurance Department Act of 1921 (40 P. S. §§ 323.1--323.8) (act).

   The Department's general requirement is that all relevant records of transactions occurring since the conclusion of the last financial examination must be retained for 5 years from the date of the last financial examination or until the conclusion of a subsequent financial examination, whichever time is greater. The accompanying Guidelines supplement this general requirement by providing guidance in the establishment of appropriate retention periods for specific types of records.

   Of course, the Guidelines are recommended minimum retention periods and do not affect any record retention requirements that may be in excess of the Guidelines, such as requirements imposed by the Internal Revenue Service, other regulatory agencies, statutes of limitation, or other applicable laws or regulations. In addition, under the authority in the act, the Department may require whatever additional records may be necessary to readily verify the financial condition of an insurer and ascertain whether the insurer has complied with the laws of this Commonwealth.

   With respect to the use of electronic paperless filing systems, 15 Pa.C.S. § 107, which applies to insurance corporations provides, in part:

Any records maintained by a corporation or other association in the regular course of its business including shareholder or membership records, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic storage media, photographs, microphotographs or any other information storage device if the records so kept can be converted into reasonable legible written form within a reasonable time.

   Sections 903 and 904 of the act (40 P. S. §§ 323.3 and 323.4) require entities subject to the Department's examination to keep records in such manner as the Department may require to readily verify the examinee's financial condition and compliance with laws and to provide timely, convenient and free access to all records. Therefore, insurers are not prohibited from using paperless filing technology as long as their records are readily accessible and usable for examination purposes.

   A paperless system should include adequate controls and be appropriately tested to identify and correct any deficiencies. Consideration should be given to the need to determine the validity or identify an alteration of certain documents, such as applications for insurance or death certificates and receipt dates. There must be an ability to produce usable hard copy, including entire approved form/rate filings with the Department's approval stamps.

   Appropriate security systems should be maintained at record storage sites, as well as adequate protection from loss or damage by fire or other hazards. Sufficient visual terminals must be available to assure that examiners are not hampered by an inability to access data during the course of an examination.

   Record retention is a matter in which an insurer's management must use prudent judgment, subject to applicable statutory requirements or restrictions. Questions concerning record retention may be directed to David DelBiondo, Director, Bureau of Examinations, at (717) 783-2142, with respect to financial examinations; or Dennis Shoop, Director of the Bureau of Enforcement, at (717) 783-2627, with respect to market conduct examinations.

Guidelines for Retention of Records

   Note: The following record retention guidelines have been developed by the Insurance Department to provide insurers with guidance on minimum time periods for retention of records for purposes of financial and market conduct examinations. The Department recognizes the need for insurers to exercise discretion in establishing record retention requirements in accordance with advice of legal counsel and that insurers may determine that longer retention periods are necessary or advisable. Of course, the Department's guidelines do not affect requirements imposed by the Internal Revenue Service or other regulatory agencies. For purposes of financial examinations, the Department will permit foreign insurers to retain financial records either for the length of time specified in the guidelines or for the length of time required for examination purposes in the insurers' home states.

Type of Record Retention Period

Accounts Payable Ledgers and Schedules 5 years*

Accounts Receivable Ledgers and Schedules 5 years*

Advertisement Files (including Internet ads) 5 years*

Agent Commission Schedules 5 years*

Agent Contracts 5 years*

Agent Discrepancies 5 years*

Agent Licensing Records (including effective/termination dates) 5 years*
(from termination)

Agent Terminations (including copies of notices to agents and Insurance Department) 5 years*

Annual/Quarterly Statement Blank and Supporting Workpapers 5 years*

Bank Reconciliations 5 years*

Borrowed Money Documents 5 years*
(after amount borrowed
is paid off)

Capital Stock and Bond Records (ledgers, transfer registers, stubs showing issues, record of interest coupons, opinions) Permanently

Cash Books 5 years*

CPA Annual Audit Reports and Management Letters Permanently

Charts of Accounts 5 years*

Checks (cancelled)
(records of uncashed drafts or checks) 7 years
7 years
or in accordance with
escheat laws

Checks (cancelled for important payments, such as taxes, purchases of property, special contracts) Permanently

Claims Files (loss reports, reported and paid claims files, including a complete chronological record) 5 years*

Collateral Loans (closing documents, appraisals/valuation documents, payment history, collateral documents) 5 years*
(after repayment)

Conflict of Interest Statements 5 years*

Consumer Complaints (including log of complaints and correspondence with state insurance department) 5 years*

Note: Failure to maintain a complete record of all complaints received during the preceding 4 years is a violation of the Unfair Insurance Practices Act (See 40 P. S. § 1171.5(11)).

Contracts and Leases 5 years*
(after expiration)

Correspondence with Policyholders (routine) 5 years*

Correspondence (general) 5 years*

Correspondence (legal and important matters) Permanently

Correspondence with State Insurance Departments (other than correspondence regarding complaints) Permanently

Duplicate Deposit Slips 5 years*

Employee Personnel Records 5 years*
(after termination)

Expense Analyses and Expense Allocation Schedules 5 years*

Forms (approved by a state insurance department) 2 years
(after claims can no longer be reported under the form)

General and Subsidiary Ledgers and End-of-Year Trial Balances 5 years*

Holding Company Registration Statements 5 years*

Internal Audit Reports 5 years*

Internal Insurance Records (current loss reports, claims, policies for insurance coverages purchased by the company for its own protection) Permanently

Internal Reports (miscellaneous) 5 years*

Inventories of Furniture, Fixtures and Equipment 5 years*
(after disposal)

Investment Plan 5 years*

Investment Records (buy and sell invoices, ledgers, journals, broker statements, custodial/trust account statements) 5 years*

Invoices from Vendors 5 years*

Journals 5 years*

Limited Partnership Interests (partnership agreement, partnership financial statements, records of distributions, equity valuation information) 5 years*
(after disposal)

Litigation Records Permanently

Minute Books of Directors and Stockholders (or Policyholders) and Committees (including by-laws and charter) Permanently

Mortgage Loans (closing documents, appraisals, payment history, rent rolls) 5 years*
(after repayment)

Notes Receivable Ledgers and Schedules 5 years*

Other Invested Assets (all pertinent documents) 5 years*
(after disposal)

Payroll Records and Summaries (including payments to pensioners and payroll deductions) 5 years*

Petty Cash Vouchers 5 years*

Policy Issue Records (including underwriter's notes/notices, original applications, declaration pages, endorsements and selection forms) 2 years
(after claims can no longer be reported under the policy)

Policy Termination Records (including documentation) 5 years*

Policyholder Dividend Records 5 years*

Premium Notices and Refunds (including proof of refund within required time period) 5 years*

Property Records (including appraisals, costs, depreciation reserves, end-of-year trial balances, depreciation schedules, titles, plans, deeds, mortgages and agreements of sale) 5 years*
(after no longer have an
interest in the property)

Rate filings (including all rates utilized during retention period) 5 years*
(after replacement by
latest filing)

Reinsurance Contracts (including records of settlements, trust accounts and letters of credit) 5 years*

Reports of State Insurance Department Examinations (financial and market conduct) 5 years*

Reserve Calculation Documentation (including actuarial opinion and supporting actuarial memorandum) 10 years

SEC Filings 5 years*

Subrogation and Salvage Records 5 years*

Surrender Request 5 years*

Tax Returns and Worksheets (including revenue agents' reports and other documents relating to determination of income tax liability) 12 years

Unclaimed Property or Escheatable Funds/Assets 10 years

Vouchers for Payments to Vendors, employees, etc. (including allowances and reimbursements of employees, officers, or other persons for travel and entertainment expenses) 5 years*

Note: ''5 years*'' refers to 5 years from the date of the last financial examination by the domiciliary regulator or until the conclusion of a subsequent financial examination, whichever time is greater.

M. DIANE KOKEN,
Insurance Commissioner

[Pa.B. Doc. No. 00-1008. Filed for public inspection June 9, 2000, 9:00 a.m.]

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Type of Record	Retention Period
Accounts Payable Ledgers and Schedules	5 years*
Accounts Receivable Ledgers and Schedules	5 years*
Advertisement Files (including Internet ads)	5 years*
Agent Commission Schedules	5 years*
Agent Contracts	5 years*
Agent Discrepancies	5 years*
Agent Licensing Records (including effective/termination dates)	5 years* (from termination)
Agent Terminations (including copies of notices to agents and Insurance Department)	5 years*
Annual/Quarterly Statement Blank and Supporting Workpapers	5 years*
Bank Reconciliations	5 years*
Borrowed Money Documents	5 years* (after amount borrowed is paid off)
Capital Stock and Bond Records (ledgers, transfer registers, stubs showing issues, record of interest coupons, opinions)	Permanently
Cash Books	5 years*
CPA Annual Audit Reports and Management Letters	Permanently
Charts of Accounts	5 years*
Checks (cancelled) (records of uncashed drafts or checks)	7 years 7 years or in accordance with escheat laws
Checks (cancelled for important payments, such as taxes, purchases of property, special contracts)	Permanently
Claims Files (loss reports, reported and paid claims files, including a complete chronological record)	5 years*
Collateral Loans (closing documents, appraisals/valuation documents, payment history, collateral documents)	5 years* (after repayment)
Conflict of Interest Statements	5 years*
Consumer Complaints (including log of complaints and correspondence with state insurance department)	5 years*
Note: Failure to maintain a complete record of all complaints received during the preceding 4 years is a violation of the Unfair Insurance Practices Act (See 40 P. S. § 1171.5(11)).
Contracts and Leases	5 years* (after expiration)
Correspondence with Policyholders (routine)	5 years*
Correspondence (general)	5 years*
Correspondence (legal and important matters)	Permanently
Correspondence with State Insurance Departments (other than correspondence regarding complaints)	Permanently
Duplicate Deposit Slips	5 years*
Employee Personnel Records	5 years* (after termination)
Expense Analyses and Expense Allocation Schedules	5 years*
Forms (approved by a state insurance department)	2 years (after claims can no longer be reported under the form)
General and Subsidiary Ledgers and End-of-Year Trial Balances	5 years*
Holding Company Registration Statements	5 years*
Internal Audit Reports	5 years*
Internal Insurance Records (current loss reports, claims, policies for insurance coverages purchased by the company for its own protection)	Permanently
Internal Reports (miscellaneous)	5 years*
Inventories of Furniture, Fixtures and Equipment	5 years* (after disposal)
Investment Plan	5 years*
Investment Records (buy and sell invoices, ledgers, journals, broker statements, custodial/trust account statements)	5 years*
Invoices from Vendors	5 years*
Journals	5 years*
Limited Partnership Interests (partnership agreement, partnership financial statements, records of distributions, equity valuation information)	5 years* (after disposal)
Litigation Records	Permanently
Minute Books of Directors and Stockholders (or Policyholders) and Committees (including by-laws and charter)	Permanently
Mortgage Loans (closing documents, appraisals, payment history, rent rolls)	5 years* (after repayment)
Notes Receivable Ledgers and Schedules	5 years*
Other Invested Assets (all pertinent documents)	5 years* (after disposal)
Payroll Records and Summaries (including payments to pensioners and payroll deductions)	5 years*
Petty Cash Vouchers	5 years*
Policy Issue Records (including underwriter's notes/notices, original applications, declaration pages, endorsements and selection forms)	2 years (after claims can no longer be reported under the policy)
Policy Termination Records (including documentation)	5 years*
Policyholder Dividend Records	5 years*
Premium Notices and Refunds (including proof of refund within required time period)	5 years*
Property Records (including appraisals, costs, depreciation reserves, end-of-year trial balances, depreciation schedules, titles, plans, deeds, mortgages and agreements of sale)	5 years* (after no longer have an interest in the property)
Rate filings (including all rates utilized during retention period)	5 years* (after replacement by latest filing)
Reinsurance Contracts (including records of settlements, trust accounts and letters of credit)	5 years*
Reports of State Insurance Department Examinations (financial and market conduct)	5 years*
Reserve Calculation Documentation (including actuarial opinion and supporting actuarial memorandum)	10 years
SEC Filings	5 years*
Subrogation and Salvage Records	5 years*
Surrender Request	5 years*
Tax Returns and Worksheets (including revenue agents' reports and other documents relating to determination of income tax liability)	12 years
Unclaimed Property or Escheatable Funds/Assets	10 years
Vouchers for Payments to Vendors, employees, etc. (including allowances and reimbursements of employees, officers, or other persons for travel and entertainment expenses)	5 years*