DOL Issues Final Rules on 401(k) Blackout Periods

Starting this week, workers with 401(k) retirement plans received new federal protection with the Labor Department’s announcement of a law requiring plan administrators to provide 30 days’ notice of blackout periods.

Congress enacted the blackout rules as part of the Sarbanes-Oxley Act of 2002. The purpose of the law is to prevent workers from losing their retirement savings during blackout periods, as happened to Enron employees who were unable to access their accounts for weeks in the fall of 2001 because of a change in administrator.

Under the new rules, plan administrators must inform participants of the starting and ending dates of the blackout periods. In addition, the administrators need to provide the reason for the blackout and advise workers that they should evaluate their investment situation in light of the upcoming suspension.

Plan administrators who violate the law will face fines up to $100 per day per plan participant. The administrators are not required to notify the Labor Department of the blackout period.

In related action, the Securities and Exchange Commission has barred corporate executives from selling company stock or exercising options during blackout periods.


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