Q&A on Dealing with Blackout Periods for 401(k) Plans, Profit Sharing Plans and ESOPs

Q&A on Dealing with Blackout Periods for 401(k) Plans, Profit Sharing Plans and ESOPs

The following Q&A will prove helpful in better understanding significant aspects of blackout periods for defined contribution retirement plans. For a more in-depth understanding of the DOL’s final rule issued in 2003, related to blackout periods, plan sponsors and interested parties should consult with qualified ERISA legal counsel.

• If the plan needs to place a temporary restriction on a particular investment, several investments or the entire plan in order to administer a change.
• Any event that would cause a participant to lose control of their retirement account. Examples may include:
  • A change in a TPA or service provider
  • A corporate merger or acquisition
  • Major changes to the plan, such as changes to available investment options
  • Suspensions required by federal securities laws
  • Suspensions in accordance with QDROs
  • Regularly schedule suspensions, which are disclosed to participants, such as in summary plan description or in participation enrollment forms.
  • Reasons for the blackout
  • Investments subject to the blackout
  • Those participant rights that have been temporarily suspended
  • The beginning and ending date of the black-out
  • A statement that participants (or beneficiaries) should evaluate their investment decisions in light of their suspended rights during the black-out
  • If at least 30 days advance notice wasn’t provided to the affected participants, a statement that Federal law generally requires the advance notice and an explanation of why at least 30 days could not be furnished
  • The name (or department), address and telephone number of the plan administrator or responsible person for answering questions about the black-out.
  • A deferral of the black-out period, which would result in a violation of ERISA (requires written determination by plan administrator or fiduciary)
  • Inability to provide notice due to unforeseeable events or beyond the plan’s control
  • Participants who are becoming or ceasing to be plan participants in connection with an M&A transaction.

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