Updating your payroll procedures for paperless, electronic documents? Good.

Improperly retaining said documents, putting you out of compliance with federal policy and regulation? Bad.

In short, are you retaining your digitally signed payroll Form I-9 correctly? Here’s what you need to know.

Compliant Payroll Record Retention: Form I-9

As part of our 401(k) plan audit, we test that the demographic information in the census and payroll records is correct. This information includes date of birth and date of hire. The best corroborating document that employers can provide, though not the only one, is Form I-9, which contains both dates AND the employee and employer sign it (provided it is completed correctly). 

In this digital age, we are coming across more and more companies that use electronic signatures without also saving verification of the identity of the signing individuals. Although most digital platforms provide this capability, employers often don’t retain it.

In our benefits plan audits, we do not comment on I-9s, as we are testing for compliance with the IRS and U.S. Department of Labor, the organizations that regulate proper 401(k) plan management. However, the U.S. Department of Homeland Security (DHS) does regulate I-9s. 

Department of Homeland Security Regulations

DHS’ rules are clear: the employer must preserve and record verifying the identity of the person producing the signature. From their site (with my emphasis):

“If you complete Form I-9 electronically using an electronic signature, your system for capturing electronic signatures must:

  • Allow individuals to acknowledge that they read the attestation;
  • Attach the electronic signature to an electronically completed Form I-9;
  • Affix the electronic signature at the time of the transaction;
  • Create and preserve a record verifying the identity of the person producing the signature;
  • Upon the employee’s request, provide a printed confirmation of the transaction; and
  • Include a method to acknowledge you have attested to the required information in Section 2.”

Section 2 pertains to the documentation verifying your employee’s identity. The DHS concludes:

“If you choose to use an electronic signature to complete Form I-9 but do not comply with these standards, DHS may determine that you have not properly completed Form I-9 and are in violation…”

So, are you retaining your digitally signed payroll Form I-9 correctly?

Answer: Ensure you include identity verification records with any digitally signed I-9s. It will make your 401(k) plan auditor’s job easier (thank you!), but more importantly, it will keep you in compliance with federal dictates.

Have any other questions on the 401(k) plan audit process and how to work with your auditor? We’re here to help. Contact us for a complimentary consultation.