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DOL press release summary as follows:
Labor Department Issues Rules On Disclosure Of Pension Plan “Blackout Periods”
WASHINGTON—The U.S. Labor Department’s Pension and Welfare Benefits Administration will publish interim final rules on Monday (Oct. 21, 2002) implementing a new federal law requiring 401(k)-type plans to give participants 30-day advance notice of “blackout periods” affecting their rights to direct investments, take loans or obtain distributions. The interim final rules contain model notice language to assist plan sponsors in carrying out this new obligation.
Blackout periods typically occur when plans change record keepers or investment options, or add participants due to a corporate merger or acquisition.
“President Bush’s retirement security proposals to protect American workers called for advance notice of blackout periods and restrictions on corporate insiders from trading their own stock when workers are frozen. These rules are the first regulatory action to implement components of the President's retirement security plan,” said Secretary of Labor Elaine L. Chao. “Workers will now be empowered to take control of their retirement assets and make informed decisions to manage their retirement accounts in advance of a blackout.
“Congress needs to take the next steps to pass legislation to give workers the right to diversify their accounts and better information including access to professional investment advice,” Chao said.
On July 30 President Bush signed the Sarbanes-Oxley Act of 2002 giving the Labor Department authority to promulgate interim final rules and a model notice implementing the blackout notice provisions. The Act requires that participants and beneficiaries be given a 30-day advance notice of a blackout period. When a blackout period affects a plan that includes employer stock as an investment option, the plan must also notify the corporate issuer of the employer stock so that corporate insiders are aware that they may not trade employer securities or exercise options during the blackout. Under the interim rules, administrators of plans with individual accounts must provide blackout notices that contain, among other things:
The reasons for the blackout period,
A description of the rights that will be suspended during the blackout period,
The start and end dates of the blackout period,
and A statement advising participants to evaluate their current investments based on their inability to direct or diversify assets during the blackout period.
A second set of rules issued by the Department provides for civil penalties of up to $100 per day per participant for plan administrators who fail or refuse to comply with the notice requirement. The interim final rules, to be published in the Oct. 21 Federal Register, are effective Jan. 26, 2003.
The rules may be viewed at: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-26522-filed and http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-26523-filed.
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