DOL Publishes New Rules for 401(k) Blackouts

New rules that require 401(k) plan sponsors to provide a minimum of 30 days notice to participants before a plan blackout period were published in yesterday’s Federal Register by the U.S. Department of Labor.

The new regulations are part of the Sarbanes-Oxley Act of 2002 and take effect on Jan. 26, 2002. "It doesn’t mean much," since most plans give at least 30 days notice to a blackout, said Mark Niziak, vice president of professional services at New York Life Investment Management (NYLIM).

"Providing notice is good, sound industry practice," Niziak said. "Any prudent recordkeeper gives ample notice of plan blackout periods to minimize the disruption to participants."

The proposed rules require sponsors to explain why the blackout period is occurring, how long it will last and what rights will be suspended. The notice must also include a statement advising participants to evaluate current investments based on their inability to direct or diversify assets during the blackout period. The rules also prohibit executives at public companies from selling company stock or options during plan blackout periods.