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Content Last Revised: 01/24/2003 |
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Code of Federal Regulations Pertaining to EBSA |
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Labor |
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Pension and Welfare Benefits Administration, Department of Labor |
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Rules and Regulations for Reporting and Disclosure |
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General Reporting and Disclosure Requirements |
29 CFR 2520.101-3 - Notice of blackout periods under individual account plans.
- Section Number: 2520.101-3
- Section Name: Notice of blackout periods under individual account plans.
(a) In general. In accordance with section 101(i) of the Act, the
administrator of an individual account plan, within the meaning of
paragraph (d)(2) of this section, shall provide notice of any blackout
period, within the meaning of paragraph (d)(1) of this section, to all
participants and beneficiaries whose rights under the plan will be
temporarily suspended, limited, or restricted by the blackout period
(the ``affected participants and beneficiaries'') and to issuers of
employer securities subject to such blackout period in accordance with
this section.
(b) Notice to participants and beneficiaries--(1) Content. The
notice required by paragraph (a) of this section shall be written in a
manner calculated to be understood by the average plan participant and
shall include--
(i) The reasons for the blackout period;
(ii) A description of the rights otherwise available to participants
and beneficiaries under the plan that will be temporarily suspended,
limited or restricted by the blackout period (e.g., right to direct or
diversify assets in individual accounts, right to obtain loans from the
plan, right to obtain distributions from the plan), including
identification of any investments subject to the blackout period;
(iii) The length of the blackout period by reference to:
(A) The expected beginning date and ending date of the blackout
period; or
(B) The calendar week during which the blackout period is expected
to begin and end, provided that during such weeks information as to
whether the blackout period has begun or ended is readily available,
without charge, to affected participants and beneficiaries, such as via
a toll-free number or access to a specific web site, and the notice
describes how to access the information;
(iv) In the case of investments affected, a statement that the
participant or beneficiary should evaluate the appropriateness of their
current investment decisions in light of their inability to direct or
diversify assets in their accounts during the blackout period (a
[[Page 390]]
notice that includes the advisory statement contained in paragraph 4. of
the model notice in paragraph (e)(2) of this section will satisfy this
requirement);
(v) In any case in which the notice required by paragraph (a) of
this section is not furnished at least 30 days in advance of the last
date on which affected participants and beneficiaries could exercise
affected rights immediately before the commencement of the blackout
period, except for a notice furnished pursuant to paragraph
(b)(2)(ii)(C) of this section:
(A) A statement that Federal law generally requires that notice be
furnished to affected participants and beneficiaries at least 30 days in
advance of the last date on which participants and beneficiaries could
exercise the affected rights immediately before the commencement of a
blackout period (a notice that includes the statement contained in
paragraph 5. of the model notice in paragraph (e)(2) of this section
will satisfy this requirement), and
(B) An explanation of the reasons why at least 30 days advance
notice could not be furnished; and
(vi) The name, address and telephone number of the plan
administrator or other contact responsible for answering questions about
the blackout period.
(2) Timing. (i) The notice described in paragraph (a) of this
section shall be furnished to all affected participants and
beneficiaries at least 30 days, but not more than 60 days, in advance of
the last date on which such participants and beneficiaries could
exercise the affected rights immediately before the commencement of any
blackout period.
(ii) The requirement to give at least 30 days advance notice
contained in paragraph (b)(2)(i) of this section shall not apply in any
case in which--
(A) A deferral of the blackout period in order to comply with
paragraph (b)(2)(i) of this section would result in a violation of the
requirements of section 404(a)(1)(A) or (B) of the Act, and a fiduciary
of the plan reasonably so determines in writing;
(B) The inability to provide the advance notice of a blackout period
is due to events that were unforeseeable or circumstances beyond the
reasonable control of the plan administrator, and a fiduciary of the
plan reasonably so determines in writing; or
(C) The blackout period applies only to one or more participants or
beneficiaries solely in connection with their becoming, or ceasing to
be, participants or beneficiaries of the plan as a result of a merger,
acquisition, divestiture, or similar transaction involving the plan or
plan sponsor.
(iii) In any case in which paragraph (b)(2)(ii) of this section
applies, the administrator shall furnish the notice described in
paragraph (a) of this section to all affected participants and
beneficiaries as soon as reasonably possible under the circumstances,
unless such notice in advance of the termination of the blackout period
is impracticable.
(iv) Determinations under paragraph (b)(2)(ii)(A) and (B) of this
section must be dated and signed by the fiduciary.
(3) Form and manner of furnishing notice. The notice required by
paragraph (a) of this section shall be in writing and furnished to
affected participants and beneficiaries in any manner consistent with
the requirements of Sec. 2520.104b-1 of this chapter, including
paragraph (c) of that section relating to the use of electronic media.
(4) Changes in length of blackout period. If, following the
furnishing of a notice pursuant to this section, there is a change in
the length of the blackout period (specified in such notice pursuant to
paragraph (b)(1)(iii) of this section), the administrator shall furnish
all affected participants and beneficiaries an updated notice explaining
the reasons for the change and identifying all material changes in the
information contained in the prior notice. Such notice shall be
furnished to all affected participants and beneficiaries as soon as
reasonably possible, unless such notice in advance of the termination of
the blackout period is impracticable.
(c) Notice to issuer of employer securities. (1) The notice required
by paragraph (a) of this section shall be furnished to the issuer of any
employer securities held by the plan and subject to the blackout period.
Such notice shall contain the information described in paragraph
(b)(1)(i), (ii), (iii) and (vi) of this section and shall be furnished
in
[[Page 391]]
accordance with the time frames prescribed in paragraph (b)(2) of this
section. In the event of a change in the length of the blackout period
specified in such notice, the plan administrator shall furnish an
updated notice to the issuer in accordance with the requirements of
paragraph (b)(4) of this section.
(2) For purposes of this section, notice to the agent for service of
legal process for the issuer shall constitute notice to the issuer,
unless the issuer has provided the plan administrator with the name of
another person for service of notice, in which case the plan
administrator shall furnish notice to such person. Such notice shall be
in writing, except that the notice may be in electronic or other form to
the extent the person to whom notice must be furnished consents to
receive the notice in such form.
(3) If the issuer designates the plan administrator as the person
for service of notice pursuant to paragraph (c)(2) of this section, the
issuer shall be deemed to have been furnished notice on the same date as
notice is furnished to affected participants and beneficiaries pursuant
to paragraph (b) of this section.
(d) Definitions. For purposes of this section--
(1) Blackout period--(i) General. The term ``blackout period''
means, in connection with an individual account plan, any period for
which any ability of participants or beneficiaries under the plan, which
is otherwise available under the terms of such plan, to direct or
diversify assets credited to their accounts, to obtain loans from the
plan, or to obtain distributions from the plan is temporarily suspended,
limited, or restricted, if such suspension, limitation, or restriction
is for any period of more than three consecutive business days.
(ii) Exclusions. The term ``blackout period'' does not include a
suspension, limitation, or restriction--
(A) Which occurs by reason of the application of the securities laws
(as defined in section 3(a)(47) of the Securities Exchange Act of 1934);
(B) Which is a regularly scheduled suspension, limitation, or
restriction under the plan (or change thereto), provided that such
suspension, limitation or restriction (or change) has been disclosed to
affected plan participants and beneficiaries through the summary plan
description, a summary of material modifications, materials describing
specific investment alternatives under the plan and limits thereon or
any changes thereto, participation or enrollment forms, or any other
documents and instruments pursuant to which the plan is established or
operated that have been furnished to such participants and
beneficiaries;
(C) Which occurs by reason of a qualified domestic relations order
or by reason of a pending determination (by the plan administrator, by a
court of competent jurisdiction or otherwise) whether a domestic
relations order filed (or reasonably anticipated to be filed) with the
plan is a qualified order within the meaning of section 206(d)(3)(B)(i)
of the Act; or
(D) Which occurs by reason of an act or a failure to act on the part
of an individual participant or by reason of an action or claim by a
party unrelated to the plan involving the account of an individual
participant.
(2) Individual account plan. The term ``individual account plan''
shall have the meaning provided such term in section 3(34) of the Act,
except that such term shall not include a ``one-participant retirement
plan'' within the meaning of paragraph (d)(3) of this section.
(3) One-participant retirement plan. The term ``one-participant
retirement plan'' means a one-participant retirement plan as defined in
section 101(i)(8)(B) of the Act.
(4) Issuer. The term ``issuer'' means an issuer as defined in
section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c), the
securities of which are registered under section 12 of the Securities
Exchange Act of 1934, or that is required to file reports under section
15(d) of the Securities Exchange Act of 1934, or files or has filed a
registration statement that has not yet become effective under the
Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not
withdrawn.
(5) Calendar week. For purposes of paragraph (b)(1)(iii)(B), the
term ``calendar week'' means a seven day period
[[Page 392]]
beginning on Sunday and ending on Saturday.
(e) Model notice--(1) General. The model notice set forth in
paragraph (e)(2) of this section is intended to assist plan
administrators in discharging their notice obligations under this
section. Use of the model notice is not mandatory. However, a notice
that uses the statements provided in paragraphs 4. and 5.(A) of the
model notice will be deemed to satisfy the notice content requirements
of paragraph (b)(1)(iv) and (b)(1)(v)(A), respectively, of this section.
With regard to all other information required by paragraph (b)(1) of
this section, compliance with the notice content requirements will
depend on the facts and circumstances pertaining to the particular
blackout period and plan.
(2) Form and content of model notice.
Important Notice Concerning Your Rights
Under The [Enter Name of Individual Account Plan]
[Enter date of notice]
1. This notice is to inform you that the [enter name of plan] will
be [enter reasons for blackout period, as appropriate: changing
investment options, changing recordkeepers, etc.].
2. As a result of these changes, you temporarily will be unable to
[enter as appropriate: direct or diversify investments in your
individual accounts (if only specific investments are subject to the
blackout, those investments should be specifically identified), obtain a
loan from the plan, or obtain a distribution from the plan]. This
period, during which you will be unable to exercise these rights
otherwise available under the plan, is called a ``blackout period.''
Whether or not you are planning retirement in the near future, we
encourage you to carefully consider how this blackout period may affect
your retirement planning, as well as your overall financial plan.
3. The blackout period for the plan [enter the following as
appropriate: is expected to begin on [enter date] and end [enter date]/
is expected to begin during the week of [enter date] and end during the
week of [enter date]. During these weeks, you can determine whether the
blackout period has started or ended by [enter instructions for use
toll-free number or accessing web site].
4. [In the case of investments affected by the blackout period, add
the following: During blackout period you will be unable to direct or
diversify the assets held in your plan account. For this reason, it is
very important that you review and consider the appropriateness of your
current investments in light of your inability to direct or diversify
those investments during the blackout period. For your long-term
retirement security, you should give careful consideration to the
importance of a well-balanced and diversified investment portfolio,
taking into account all your assets, income and investments.] [If the
plan permits investments in individual securities, add the following:
You should be aware that there is a risk to holding substantial portions
of your assets in the securities of any one company, as individual
securities tend to have wider price swings, up and down, in short
periods of time, than investments in diversified funds. Stocks that have
wide price swings might have a large loss during the blackout period,
and you would not be able to direct the sale of such stocks from your
account during the blackout period.]
5. [If timely notice cannot be provided (see paragraph (b)(1)(v) of
this section) enter: (A) Federal law generally requires that you be
furnished notice of a blackout period at least 30 days in advance of the
last date on which you could exercise your affected rights immediately
before the commencement of any blackout period in order to provide you
with sufficient time to consider the effect of the blackout period on
your retirement and financial plans. (B) [Enter explanation of reasons
for inability to furnish 30 days advance notice.]]
6. If you have any questions concerning this notice, you should
contact [enter name, address and telephone number of the plan
administrator or other contact responsible for answering questions about
the blackout period].
(f) Effective date. This section shall be effective and shall apply
to any blackout period commencing on or after January 26, 2003. For the
period January 26, 2003 to February 25, 2003, plan administrators shall
furnish notice as soon as reasonably possible.
[68 FR 3727, Jan. 24, 2003]
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