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Plan Insight

MARCH 2010 Newsletter

Blackout Period Notice Requirements

Most defined contribution plans allow participants to direct the investment of their accounts in the plan. Sometimes, a plan sponsor must temporarily suspend the ability of participants to change investment selections under the plan, or to take loans or distributions. These periods, known as "blackout periods," can occur for a number of reasons, but the most common are when changes occur in the plan's third party administrator, investment fund provider or other service providers. Do you know the legal requirements regarding "blackout periods?"

DoL guidance addresses the required contents of the notice and timing, includes a model participant notice and is effective for all blackout periods beginning on or after January 26, 2003.

The guidance indicates that:

      The notice must describe participantsí and beneficiariesí rights otherwise available under the plan during the blackout period and its projected duration, including the expected start and end dates.

      If notice of the blackout period is not issued at least 30 days before it begins, the notice must explain the delay. The notice may not be issued more than 60 days before the blackout, although supplemental communication may be provided to participants before then.

      The notice must provide the name, address and phone number of the plan administrator or other person responsible for answering participantsí questions about the blackout.

There are two circumstances under which the 30-day advance notice requirement does not apply: when deferring the blackout period for 30 days after giving the notice would violate ERISAís fiduciary standards (e.g., if the plan fiduciary immediately suspends investment in employer stock because the employer has filed for bankruptcy), and when the events prompting the blackout were unforeseeable or beyond the plan administratorís control.

Using the model amendment is not mandatory, but many employers will want to use it, especially the provision that satisfies the requirement to advise participants of the importance of reviewing their investments before the blackout, and a general statement that federal law requires furnishing the notice in advance of the blackout.

 

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Information is provided for review and consideration only. Please consult legal and tax advisors for practical advice pertaining to your business and personal situations.

This page was last reviewed and/or updated on Friday, July 03, 2015 05:21 PM

 

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