Blackout Notice Suit Allowed to Move Forward

July 19, 2010 ( – A federal judge in Ohio ruled that a 401(k) profit-sharing plan and two participants can press forward with their lawsuit alleging that Principal Life Insurance Co. breached its duty to make a timely notice of a plan blackout period.

U.S. District Judge Sara Lioi of the U.S. District Court for the Northern District of Ohio ruled that Principal and various Principal entities named as defendants violated the 30-day blackout advance notice requirement in the Employee Retirement Income Security Act (ERISA).  

In making that ruling, Lioi rejected defense arguments that Principal was not plan administrator of the Roholt Vision Institute Inc. 401(K) Profit Sharing Plan. Lioi asserted that there was a “strong inference” that the defendants had been delegated the plan administrator role since they had control over a separate plan asset account. 

In addition to the defendants’ ability to exercise control over the plan assets, Lioi also pointed to the fact that the Principal announced the blackout only hours before it started. 

According to the opinion, the plan entered into a group annuity contract with Principal. Pursuant to this group annuity contract, Principal accepted an appointment as investment manager of the assets for the plan, which were to be held in separate accounts as required by the group annuity contract. 

Principal announced the blackout — for the separate account containing the plan assets — on September 25, 2008, that was to start the following morning and end three years after that. 

The participants claimed their account values dropped because of the inability to transfer assets during that time.

The case is Roholt Vision Institute Inc. 401(K) Profit Sharing Plan v. Principal Life Insurance Co., N.D. Ohio, No. 5:09-CV-02431.