Case of the Week: Changes in Plan Blackout Ending Date

The ERISA consultants at the Learning Center Resource Desk, which is available through Columbia Threadneedle Investments, regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with an advisor in Texas is representative of a common inquiry involving a blackout period for a 401(k) plan. The advisor asked:

“My client is changing his 401(k) plan to a new record keeper and is under a blackout. We anticipate the blackout may go longer than what he initially disclosed to the participants. What are the participant notification requirements when the end of a blackout period is extended?”

Highlights of Discussion

Pursuant to DOL Reg. Sec. 2520.101(b)(4), if a plan’s blackout period will run for a longer period than was initially disclosed to the participants, the plan sponsor must furnish a new notice to indicate the change.

The updated notice must:

  • explain the reasons for the change; and
  • identify all material changes in the information contained in the prior notice.

The plan sponsor must furnish the updated notice 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.

The DOL also expects that where a plan administrator has the ability to provide notice to some participants earlier than others, the administrator should provide the notice even if notice to other participants would not be practicable.

Conclusion

If a 401(k) plan’s blackout period will run past the previously disclosed end date, the plan sponsor has the obligation to issue a second updated notice to affected participants and beneficiaries.

The Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC (RLC), a third-party industry consultant that is not affiliated with Columbia Threadneedle. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Columbia Threadneedle does not provide tax or legal advice. Consumers consult with their tax advisor or attorney regarding their specific situation.

Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Columbia Threadneedle.

Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies.

©2017, Columbia Management Investment Advisers, LLC. Used with permission.

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