PWBA Releases Final Blackout Rules

The final rules, to be published in the  Federal Register on January 24, 2003 , state 401(k) plan administrators must provide blackout notices that contain:

• Reasons for the blackout
• Description of the workers’ rights that will be suspended
• Start and end dates of the blackout period
• Statement advising workers to evaluate their current investments based on their inability to direct or diversify assets during the blackout period.

The final rules will supersede interim final rules issued by the department on October 21, 2002 (See  New Blackout Rules, Penalties Published). Following a period of public comment (See  PWBA Posts Comments on Blackout Notice Requirements ) the PWBA made c hanges to the interim final rules in the final regulations, including:

• Flexibility for plan administrators in describing the starting and endings dates of the blackout period
• Clarification of situations that are not blackout periods such as   suspensions resulting from pending qualified domestic relations order determinations and actions by individual participants
• A special rule for issuers of company stock who are also the plan administrators

The final rules also outlined the application of civil penalties under the Sarbanes-Oxley Act of up to $100 per day per each affected participant or beneficiary for failure or refusal by plan administrators to provide such notice.

Authorized as part of the Sarbanes-Oxley Act of 2002,   the law is effective for blackout periods occurring on or after Sunday January 26, 2003. For blackout periods beginning between January 26, 2003 and February 25, 2003, plan administrators must furnish notice as soon as reasonably possible, according to the rules.   The PWBA said this provision was intended to ensure that a statutorily required notice be provided with respect to blackout periods which commence prior to February 26.

“These rules are an essential part of the President’s efforts to improve workers’ retirement security,” said Elaine Chao, US Secretary of Labor, given authority to promulgate rules and a model notice implementing the blackout notice provisions under Sarbanes-Oxley . “Workers will now be assured of the opportunity to effectively manage their retirement accounts in advance of a blackout and they will no longer be forced to stand by as corporate executives bail out of company stock while rank-and-file workers’ accounts are frozen.”

Beginning Friday, January 24, the final rules may be at www.dol.gov/pwba under Laws and Regulations.

In the Federal Register at:

• Civil penalties for failure to provide notice, etc .
• Temporary suspension of right to direct or diversify investments and obtain loans or distributions