Make participants aware of plan blackout periods

Major changes to a retirement plan that affect participants’ access to their investments, such as transferring to a new recordkeeper or fund manager, may require a blackout period. During this time, the ability for participants to select or change investment options, transfer assets, or obtain withdrawals and loans may be limited or restricted.

Plan sponsors must give participants 30 days’ advance notice of any blackout period that will last more than three consecutive business days.

Notification requirements

Whether delivered electronically or in writing, blackout notices must include:

  • The reasons for the blackout period
  • A list of the investments or activities restricted during the period
  • A statement advising participants to evaluate their current investments in light of upcoming temporary restrictions on transactions
  • The expected dates of the blackout period
     

See our sample plan notices that you can customize to communicate with your employees. You can also contact your third-party administrator if you have questions.

Notification exceptions

In certain cases, exceptions to the 30-day advance notice requirement are allowed. However, participants must still be notified as soon as possible. Such exceptions include:

  • if delaying the blackout period would violate fiduciary responsibility (for example, a plan sponsor may decide to immediately prohibit participants from investing in the stock of a company that has declared bankruptcy)
  • if a blackout is caused by unpredictable and uncontrollable circumstances or events (for example, computer system failure)
     

No insider trading

Corporate executives and directors cannot trade any of their own company stock or exercise stock options during blackouts.

Penalties

A plan administrator may be fined up to $100 a day per participant for failure to provide notification of a blackout period.

Individuals convicted of an ERISA violation may face imprisonment of up to 10 years and/or fines up to $100,000. Entities convicted of violating ERISA may be fined up to $500,000.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
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