In October, the Department of Labor’s Pension and Welfare Benefits Administration (PWBA) issued so-called “interim final rules” on new rules that require that participants and beneficiaries be given 30 calendar days of advance written notice of any “blackout” period, and also outlined the application of civil penalties under the Sarbanes-Oxley Act (see New Blackout Rules, Penalties Published ).
At that time, the PWBA solicited comments on those proposals, and has now posted those comments on its web site. The comments include feedback from the American Benefits Council, AARP, the SPARK Institute, Principal, Fidelity, the Profit Sharing/401(k) Council of America, America’s Community Bankers, and the ERISA Industry Committee, among others.
Among the questions, concerns and clarifications put forth by the commentators are:
- Is regular system maintenance that keeps participants from their accounts for a day or so considered a blackout?
- Could the notice designate a “member of the benefits department” as contact for questions, rather than a specific single contact name, which could be unwieldy for large entities?
- What about “blackouts” of individual accounts, rather than planwide (security for address changes, or freezes while determinations are made on domestic relations orders, or tax liens, for example)?
- Suggestion that closure of a particular fund for NEW contributions only should not trigger the blackout notice rules, unless old money is frozen in that new option.
- Suggestion that a 30-day window of communication is too short a period to conduct such mailings for large plans (i.e. between the date at least 30 days before, but not more than 60 days ahead of…). One commentator suggested expanding the rule to be not more than 90 days ahead.
- Recommendation that the notice encouraging the importance of account diversification also remind workers of the special tax treatment of employer securities held within their accounts.
- Suggestion that the notice be expanded to give a plus or minus date range on either side of specific dates in the notice to provide flexibility, and a recognition that the process doesn’t always work out the way one plans. Another commentator suggested that a more general communication, alongside a “readily available” means of obtaining more specific information about the specific ending data, such as a toll-free number.
- Clarification that “affected participant” is only those with balances in the plan, not those who are merely eligible to participate.
- Suggested an added statement that it is a breach of fiduciary duty for a blackout period to be longer than necessary, while perhaps adding language that speaks to a “maximum allowable” blackout period.
- Desired clarification that plan termination is not a blackout event.
- A suggestion that a direct “fund to fund” mapping process during a transition to a new investment provider does not result in a blackout if investment elections are otherwise not interrupted.
- Suggestion that the timing strictures of the notice period recognize the reality that multiple tasks have varying blackout lengths – distributions/loans generally black out earlier and for longer than transfers, for example.
- Clarify that use of last known address for mailing purposes is sufficient.
- Recommend the elimination of a requirement that the plan administrator determine in writing that the notice period cannot be reasonably complied with, allow them to rely on clear, independent, written communication, say from a service provider.
- Expressed a concern that language in the model notice about language regarding the dangers of holding investments in securities of an individual company might confuse investors who only had access to mutual fund options, rather than company stock.
- Desired a clarification of the role of administrator required to comply with the requirements – or more precisely, clarification that it does NOT include non-fiduciary recordkeepers.
You can check out the remaining comments at http://www.dol.gov/pwba/regs/cmt_blackout_reg.html
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