Editor's Note: These interim rules have been modified and adopted in final form, at https://benefitslink.com/erisaregs/sarbanesnotice-final-2003.html (click)

Interim Final Rule Relating to Notice of Blackout Periods to Participants and Beneficiaries Pursuant to the Sarbanes-Oxley Act of 2002

[Federal Register: October 21, 2002 (Volume 67, Number 203)]
[Rules and Regulations]
[Page 64765-64774]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21oc02-14]

[[Page 64765]]

-----------------------------------------------------------------------

Part V

Department of Labor

-----------------------------------------------------------------------

Pension and Welfare Benefits Administration

-----------------------------------------------------------------------

29 CFR Parts 2520, 2560, and 2570

Interim Final Rule Relating to Notice of Blackout Periods to
Participants and Beneficiaries and Civil Penalties Under ERISA Section
502(c)(7) and Conforming Technical Changes On Civil Penalties Under
ERISA Sections 502(c)(2), 502(c)(5) and 502(c)(6); Interim Final Rules

[[Page 64766]]

-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Part 2520

RIN 1210-AA90

Interim Final Rule Relating to Notice of Blackout Periods to
Participants and Beneficiaries

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: This document contains interim final rules under new section
101(i) of the Employee Retirement Income Security Act of 1974 (the Act
or ERISA). Section 101(i) of ERISA, which was enacted into law on July
30, 2002 as part of the Sarbanes-Oxley Act of 2002 (the SOA), provides
that written notice is to be provided to participants and beneficiaries
of individual account plans of any "blackout period" during which
their right to direct or diversify investments, obtain a loan or obtain
a distribution under the plan may be temporarily suspended. This
interim final rule is published pursuant to section 306(b)(2) of the
SOA in order to carry out the provisions of section 101(i) of ERISA,
and to invite the public to submit comments on the interim regulation
so as to obtain information as to what further guidance in this area
would be helpful to plan administrators and their advisors in
fulfilling their duties to provide notice of blackout periods.

DATES: Effective date: This interim final rule is effective January 26,
2003 and shall apply to blackout periods commencing on or after that
date. Comment date: Written comments on this interim final rule must be
received by November 20, 2002.

ADDRESSES: Written comments on the interim final rule (preferably three
copies) should be submitted to: Office of Regulations and
Interpretations, Pension and Welfare Benefits Administration, Room N-
5669, U.S. Department of Labor, 200 Constitution Avenue, NW.,
Washington, DC 20210. Attention: Blackout Notice Regulation. Written
comments may also be sent by Internet to the following address: e-
ORI@pwba.dol.gov. All written comments will be available for public
inspection at the Public Disclosure Room, Pension and Welfare Benefits
Administration, U.S. Department of Labor, Room N-1513, 200 Constitution
Avenue, NW., Washington, DC, from 8 a.m. to 4:30 p.m. (Monday-Friday).

FOR FURTHER INFORMATION CONTACT: Janet A. Walters, Office of
Regulations and Interpretations, Pension and Welfare Benefits
Administration, U.S. Department of Labor, Washington, DC 20210, (202)
693-8510 (not a toll free number).

SUPPLEMENTARY INFORMATION:

A. Background

    The Sarbanes-Oxley Act of 2002 (the SOA), Pub. L. 107-204, enacted
on July 30, 2002, provides that the Secretary of Labor shall promulgate
within 75 days of enactment interim final rules necessary to carry out
the provisions of section 306(b) of the SOA and, accordingly, these
interim final rules will become effective without advance notice and
comment.

    Section 306(b)(1) of the SOA amended section 101 of ERISA to add a
new subsection (i), requiring that administrators of individual account
plans provide notice to affected participants and beneficiaries in
advance of the commencement of any blackout period. For purposes of
this notice requirement, a blackout period generally includes any
period during which the ability of participants or beneficiaries to
direct or diversify assets credited to their accounts, to obtain loans
from the plan or to obtain distributions from the plan will be
temporarily suspended, limited or restricted. The most common reasons
for imposition of a blackout period include changes in investment
alternatives or recordkeepers, and corporate mergers, acquisitions, and
spin-offs that impact the pension coverage of groups of participants.

    ERISA section 101(i)(6) provides that the Secretary shall issue
model notices that meet the requirements of subsection (i). A model
notice is included as part of this interim final rule.

    Section 306(b)(3) of the SOA amends ERISA section 502 to establish
a new civil penalty applicable to a plan administrator's failure or
refusal to provide the blackout notice required by section 101(i) of
ERISA. Interim final rules implementing this civil penalty also appear
elsewhere in today's issue of the Federal Register.

    The issuance of these interim final rules will help serve to
preserve and protect the retirement benefits of American workers and
their families.

B. Overview of Interim Final Rules

    In general, the rules being adopted in this interim final rule
track the provisions of ERISA section 101(i), as added by section
306(b)(1) of the SOA. The following is a general overview of the
interim final rule, to be codified at 29 CFR 2520.101-3.

    Paragraph (a) of Sec.  2520.101-3 describes the general requirement
of section 101(i) of ERISA that administrators of certain individual
account plans provide notice of blackout periods to participants and
beneficiaries whose rights under the plan will be temporarily
suspended, limited or restricted by a blackout period (the "affected
participants and beneficiaries"), as well as to issuers of employer
securities held by the plan.

    Paragraph (b) of Sec.  2520.101-3 sets forth the requirements for
notices to be furnished to affected participants and beneficiaries.
Paragraph (b)(1) provides that the notices shall be written in a manner
calculated to be understood by the average plan participant and sets
forth the specific content requirements applicable to the notices. The
content requirements of the regulation essentially track the
requirements of section 101(i)(2)(A) of the Act. Paragraph (b)(1)(ii)
makes clear that the notice must include a description of the rights
otherwise available under the plan to affected participants and
beneficiaries that will be temporarily suspended during the blackout
period, in addition to the identification of the investments subject to
the blackout period. Paragraph (b)(1)(iii) makes clear that the notice
must contain the expected beginning and ending date of the blackout
period. In the Department's view, an indication of the expected length
of the blackout period is intended both to enable participants and
beneficiaries to factor the duration of the blackout into their pre-
blackout period investment and other decisions and to apprise
participants and beneficiaries as to when they will be able to
recommence exercising their rights under the plan. Accordingly, it is
the view of the Department that the description of the length of the
blackout period must include the expected ending date of the blackout
period.

    Paragraph (b)(1)(iv) requires the inclusion of a statement advising
participants and beneficiaries to review their current investments in
light of their inability to direct or diversity their assets during the
blackout period and provides that use of the advisory statement
contained in paragraph 4. of the model notice (at paragraph (e)(2) will
satisfy this content requirement for the notice.

    Section 101(i)(2)(A)(v) of the Act provides that notice shall
contain "such other matters as the Secretary may require by
regulation." In this regard,

[[Page 64767]]

the Department has added, for purposes of this interim final rule, two
informational items.

    First, given the importance of adequate advance notice of blackout
periods to plan participants and beneficiaries, the Department believes
that, in those situations where 30 days advance notice is not
furnished, participants and beneficiaries should be furnished an
explanation as to why the plan was unable to furnish at least 30 days
advance notice. Paragraph (b)(1)(v) of the interim final rule,
therefore, provides that, where notices are furnished less than 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, the notice must contain a general
statement concerning the Federal law requirement of 30 days advance
notice and an explanation as to why such notice could not be furnished.
The requirement for a general statement in paragraph (b)(1)(v)(A) will
be satisfied if the notice contains the general statement appearing in
paragraph 5.(A) of the model notice at paragraph (e)(2). Paragraph
(b)(1)(v) does not apply to the exceptions in paragraph (b)(2)(ii)(C)
involving blackout periods in connection with mergers, acquisitions,
divestitures, or similar transactions inasmuch as notices of such
blackout periods are required to be furnished as soon as reasonably
possible. (See ERISA section 101(i)(3).)

    Second, given the potential impact of a blackout period on a
participant's or beneficiary's financial planning, it is likely that
participants and beneficiaries will have questions about a blackout
period. For this reason, the Department has determined that the notice
should contain the name, address and telephone number of a person who
can answer questions concerning the blackout period. Specifically,
paragraph (b)(1)(vi) provides that the notice must contain the name,
address and telephone number of the plan administrator or other person
responsible for answering questions regarding the blackout period.

    The Department specifically invites comments on what, if any,
additional information should be required to be contained in the
blackout notice furnished to participants, beneficiaries and issuers
under this section.

    Paragraph (b)(2) describes the timing requirements applicable to
furnishing the notice to affected participants and beneficiaries.
Paragraph (b)(2)(i) provides that notice shall be furnished at least 30
days, but not more than 60 days, in advance of the last date on which
affected participants and beneficiaries could exercise their affected
rights immediately before the commencement of any blackout period. It
is the view of the Department that Congress, in providing a 30-day
advance notice requirement, intended to ensure that each participant
and beneficiary affected by a blackout period had an adequate
opportunity both to consider the effects of the blackout period on
their investments and financial plans and to take action, if
appropriate, in anticipation of the blackout period. In order to ensure
that each affected participant and beneficiary is afforded an
opportunity to assess the potential effects of a blackout, as
contemplated by Congress, the interim rule requires that, except to the
extent otherwise provided, the 30-day period must be counted back from
the last date on which the participant or beneficiary had the right to
take action under the terms of the plan in anticipation of the blackout
period.

    For example, in the case of an individual account plan that
provides for daily trading, the 30-day period would be counted back
from the date immediately preceding the commencement of a blackout
period affecting the right to trade. In the case of a plan that
provides participants and beneficiaries the right to direct their
investments on a monthly basis, notice would have to be provided at
least 30 days prior to the month preceding the month in which a
blackout period affecting such rights occurs. For example, under a plan
permitting participants to direct their investments during the first
fifteen days of each month, it is determined that in order to change
recordkeepers, participant direction of their investments will have to
be suspended from the 1st to the 15th of May. If the 30-day notice
period were counted from the date immediately preceding the
commencement of the blackout period, notice could be provided on April
1st, thereby affording participants only 15 days (April 1st-15th) to
consider and take action in anticipation of the blackout period. Under
the regulation, notice is required to be furnished at least 30 days in
advance of the last date on which participants could exercise the
affected rights immediately before the commencement of the blackout
period. In the immediate example, the last date on which participants
could take action in anticipation of the blackout period would be April
15th, accordingly notice would have to be provided to participants not
later than March 16th.

    The Department notes that all references in the regulation to
"days" are references to calendar days, not business days, unless
specifically noted otherwise. For purposes of the interim final rule,
the Department also established an outside maximum period of 60 days
preceding the last day on which participants and beneficiaries could
exercise the affected rights immediately before the commencement of a
blackout period in order to ensure that notice is not furnished so far
in advance of the commencement date so as to undermine the importance
of the notice to affected participants and beneficiaries. The
Department notes that if a plan administrator wishes to provide a
longer period for affected participants and beneficiaries to consider
the effects of a blackout period on their individual accounts, there is
nothing in the interim final rule that precludes an administrator from
supplementing the requirements of the regulation, by furnishing earlier
or more frequent notices than that required by the interim final rule,
provided that at least one notice is provided to participants and
beneficiaries that complies with the timing and content of the interim
final rule. The Department specifically invites comments on the need
for, and length of, such a limitation on advance notice of blackout
periods.

    Paragraph (b)(2)(ii)(A) and (B) sets forth two circumstances under
which the 30-day advance notice requirement does not apply. The first
circumstance is where a deferral of the blackout period would result in
a violation of the exclusive purpose and prudence requirements of
section 404(1)(A) and (B) of the Act. For example, the ABC company has
announced that it is filing for bankruptcy. The ABC company's 401(k)
plan has ABC common stock as one of its investment options. F, the
401(k) plan administrator, determines that, given this event, it would
not be prudent to continue to permit participants to direct investments
into ABC company stock, effective immediately. In such a situation, F
would not, pursuant to Sec.  2520.101-3(b)(2)(ii)(A), be required to
give 30 days notice to the affected participants and beneficiaries, but
would be required to notify them in writing as soon as possible of the
blackout period.

    The second circumstance under which the 30-day advance notice
requirement does not apply is where commencement of the blackout period
is due to events that were unforeseeable or circumstances that were
beyond the control of the plan administrator. For example, the DEF
company's profit-sharing plan's recordkeeper has informed plan
administrator G that due

[[Page 64768]]

to a major computer failure, the computer program for recording and
processing loans and distributions from the plan has been incapacitated
and that it will take approximately ten days to fix the system. In such
a situation, G would not, pursuant to Sec.  2520.101-3(b)(2)(ii)(B), be
required to give 30 days' notice to the affected participants and
beneficiaries of their temporary inability to receive loans and
distributions from the plan, but would be required to notify them as
soon as reasonably possible, unless G determines that such notice in
advance of the termination of the blackout is impracticable. The
Department anticipates that plan administrators will rely on this
exception only in rare circumstances.

    In both of the foregoing circumstances, the plan administrator must
make a written determination with respect to the circumstances
precluding compliance with the 30-day advance notice requirement. The
interim final rule, at paragraph (b)(2)(iv), requires that such
determinations must be dated and signed by the plan administrator.

    Section 101(i)(3) generally provides that in any case in which a
blackout period applies only to one or more participants or
beneficiaries in connection with a merger, acquisition, divestiture, or
similar transaction involving the plan or plan sponsor and occurs
solely in connection with becoming or ceasing to be a participant or
beneficiary under the plan by reason of such merger, acquisition,
divestiture, or similar transaction, the 30-day advance notice
requirement shall be treated as met if the notice is furnished to such
participants and beneficiaries to whom the blackout period applies as
soon as reasonably practicable. Paragraph (b)(2)(ii)(C) makes clear
that notice to such participants and beneficiaries is an exception to
the general rule that the 30-day notice be furnished to all affected
participants and beneficiaries.

    Paragraph (b)(2)(iii) provides that, in any case in which the 30-
day advance notice rule is not required to be applied, the
administrator is required to provide notice as soon as reasonably
possible under the circumstances, unless such notice in advance of the
termination of the blackout period is impracticable. If, therefore, a
plan administrator concludes under such circumstances that notice could
not be furnished in sufficient time in advance of the termination of
the blackout period to alert participants and beneficiaries of the
termination date and resumption of plan rights, no notice would be
required to be provided under this section. Such might be the case
where the need for a blackout period is determined only a few days
before the beginning of the blackout period and the blackout period is
only a few days in duration. The Department invites comments on, and
examples of, circumstances under which the furnishing of notice in
accordance with the regulation would be impracticable.

    Paragraph (b)(3) provides that the blackout notice must be in
writing and may be furnished in any manner permitted under 29 CFR
2520.104b-1, including through electronic media. For purposes of this
interim final rule, a blackout notice will be considered furnished as
of the date of mailing, if mailed by first class mail, or as of the
date of electronic transmission, if transmitted electronically. The
Department specifically invites comments on the appropriateness of such
furnishing rule.

    Paragraph (b)(4) describes the notice requirements applicable to
changes in the beginning or ending date of the blackout period. The
interim final rule provides that, under such circumstances, the
administrator is required to provide all affected participants and
beneficiaries with an updated notice explaining the reasons for the
change in the date(s) and identifying all material changes in the
information contained in the prior notice. The updated notice must be
provided as soon as reasonably possible, unless such notice in advance
of termination of the blackout period is impracticable.

    Paragraph (c) of Sec.  2520.101-3 describes the plan
administrator's obligation to provide notice of a blackout period to
the issuer of employer securities held by the plan and subject to the
blackout period. Paragraph (c)(1) generally provides that the content
and timing requirements applicable to the furnishing of notices to
participants and beneficiaries also apply to the furnishing of notices
to the issuer of employer securities. While the interim final rule does
not require that all the information required to be included in the
notice to participants and beneficiaries be included in the notice to
the issuer, it is the view of the Department that a plan administrator
may satisfy its obligation to notify the issuer by providing the same
notice furnished to participants and beneficiaries under this rule.

    Paragraph (c)(2) provides that the notice of the blackout period
shall be furnished to the agent for service of legal process for the
issuer, unless the issuer has provided the plan administrator the name
of another person for service of such notice. Paragraph (c)(2) is
intended to ensure that there is no ambiguity as to whom the
administrator must serve notice of the blackout period. Pursuant to
section 306(a)(6) of the SOA, issuers are required to notify directors,
executive officers, and the Securities and Exchange Commission of the
blackout period.

    Paragraph (d) of Sec.  2520.101-3 sets forth, for purposes of the
interim final rule, definitions of: (1) "blackout period"; (2)
"individual account plan"; and (3) "one-participant retirement
plan", each of which is identical to the definitions in section
101(i)(7), (8)(A) and 8(B) of the Act, respectively. Paragraph (d)(4)
defines the term "issuer" for purposes of the notice provisions.
Consistent with the provisions of section 2(a)(7) of the SOA, issuer
means an issuer as defined in section 3 of the Securities Exchange Act
of 1934 (15 U.S.C. 78c),\1\ 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.
---------------------------------------------------------------------------

    \1\ Section 3 of the Securities Exchange Act of 1934 defines the
term "issuer" to mean any person who issues or proposes to issue
any security; except that with respect to certificates of deposit
for securities, voting-trust certificates, or collateral-trust
certificates, or with respect to certificates of interest or shares
in an unincorporated investment trust not having a board of
directors or of the fixed, restricted management, or unit type, the
term "issuer" means the person or persons performing the acts and
assuming the duties of depositor or manager pursuant to the
provisions of the trust or other agreement or instrument under which
such securities are issued; and except that with respect to
equipment-trust certificates or like securities, the term "issuer"
means the person by whom the equipment or property is, or is to be,
used.
---------------------------------------------------------------------------

    Paragraph (e) of Sec.  2520.101-3 provides a model notice to
facilitate compliance with the blackout notice requirements by plan
administrators. Use of the model is not mandatory. However, the interim
final rule provides that use of the advisory statement set forth at
paragraph 4. of the model notice will be deemed to satisfy the notice
content requirements of paragraph (b)(1)(iv) of the rule pertaining to
advising participants and beneficiaries about the importance of
reviewing their plan investments in anticipation of their inability to
direct or diversify their investments during the blackout period. The
interim final rule also provides that use of the general statement set
forth in paragraph 5. of the model notice will be deemed to satisfy the
requirement of

[[Page 64769]]

paragraph (b)(1)(v)(A) that the notice contain a general statement that
Federal law requires furnishing of blackout notices in advance of the
blackout period.

    This model is intended to deal solely with the content requirements
prescribed in paragraph (b)(1) and not other matters with respect to
which disclosure may be required, such as changes in investment
options.

    Paragraph (f) of Sec.  2520.101-3 sets forth the effective date of
the interim final rule. Pursuant to paragraph (f), the rule is
effective January 26, 2003--the effective date of the SOA section 306
amendments to ERISA. Paragraph (f) provides that the notice
requirements shall apply to blackout periods commencing on or after
January 26, 2003, and that, for blackout periods beginning between
January 26, 2003 and February 25, 2003, plan administrators shall
furnish notice as soon as reasonably possible. This provision is
intended to ensure that a statutorily required notice be provided with
respect to blackout periods which commence before February 26, 2003.

    This interim final rule does not deal with the application of the
fiduciary provisions as they relate to the timing and administration of
a blackout period.

C. Request for Comments

    In addition to the specific requests for comments identified above,
the Department encourages all interested persons to submit their
comments, suggestions and views concerning the provisions of this
interim final rule, including the model notice. In particular, the
Department is interested in any area in which additional guidance would
facilitate compliance with these important rules.

    Written comments on the this rule should be submitted to: Office of
Regulations and Interpretations, Pension and Welfare Benefits
Administration, Room N-5669, U.S. Department of Labor, 200 Constitution
Avenue, NW., Washington, DC 20210. Attention: Blackout Notice
Regulation. Written comments may also be sent by Internet to the
following address: e-ORI@pwba.dol.gov. Written comments on this rule
must be received no later than November 20, 2002. The comment period is
being limited to 30 days to enable the Department to adopt changes to
the interim final rule prior to the effective date of the SOA
amendments.

D. Regulatory Impact Analysis

Summary

    The costs associated with this interim final rule arise primarily
from the statutory requirement to prepare and distribute advance
notices of the imposition of blackout periods. The aggregate costs for
plans required to provide this notice are estimated to be $13.9 million
per year. The benefits afforded participants and beneficiaries by the
statute and interim final rule cannot be quantified, but are expected
to be substantial. This requirement will ensure that notices are always
provided, are timely, and have appropriate content. Economic benefits
will accrue to participants or beneficiaries as a result of their
enhanced ability to exercise control over their retirement plan assets
with adequate information to inform their decisions. The assurance of
receiving advance notice of events that may be critical to participant
decisionmaking will increase confidence in the security of retirement
assets and promote new and continued plan participation. This guidance
will also assist plan administrators in their efforts to fulfill their
obligations to participants and beneficiaries. Finally, the requirement
for notice to issuers of employer securities affected by blackout
periods will serve to some extent to equalize the rights of plan
participants and beneficiaries and the officers and directors of the
issuer with respect to those securities.

Benefits and Costs

    The SOA amendments to ERISA and this implementing guidance will
have several important benefits. First, acknowledging that plan
administrators impose blackout periods from time to time in the
ordinary course of business, the SOA ensures the communication of
critical information to affected participants and beneficiaries. The
timing and content of the required notice will ensure that participants
and beneficiaries are aware of significant events affecting their
ability to make meaningful decisions concerning their retirement
savings. While many plan administrators may currently provide
disclosures similar to those required by the statute and interim final
rule, this new requirement will ensure that appropriate information is
provided in a consistent and timely manner.

    This advance knowledge will have economic value and increase
confidence in the security of retirement savings. Timely notice and an
understanding of the reasons for and expected duration of a blackout
period will benefit participants and beneficiaries economically by
offering them ample opportunity to assess their current investments
decisions, and to adjust their exposure to loss if they wish to do so,
to the extent possible within the existing options available under the
plan. Advance notice of blackout periods cannot eliminate fluctuations
of market value during a period when existing investment instructions
cannot be modified. However, notice will allow affected participants
and beneficiaries to maximize their exercise of control as they deem
appropriate under their current circumstances.

    Assurance of the opportunity to exercise control with adequate
knowledge, in advance of events that will affect their ability to
exercise control, will increase participant and beneficiary confidence
that the plan is being operated prudently. Participants frequently
express concern when significant changes are made to plan options, or
when rights previously available are temporarily limited. Assuring
knowledge of the timing and reasons for such changes should serve to
promote confidence in the security of retirement savings and promote
continued growth in participation in the retirement plans offered by
plan sponsors.

    Guidance on the statutory notice requirement will benefit plan
sponsors and administrators by clarifying the manner in which they may
discharge their obligation to ensure that participants and
beneficiaries have access to information necessary to make informed and
meaningful investment decisions. Blackout periods occur for a variety
of reasons. Their occurrence and timing are often, but not always,
within the control of the plan administrator. The most common reasons
for imposition of a blackout period include changes in investment
alternatives or recordkeepers, and corporate mergers, acquisitions, and
spin-offs that impact the pension coverage of groups of participants.
Plan administrators will wish to ensure that proper accounting and
record transfer is accomplished as timely and accurately as possible,
while at the same time fulfilling their obligation to advise
participants about important matters affecting their rights under the
plan.

    The value of these many benefits cannot be specifically quantified.
However, the conclusion that advance notice of blackout periods
produces economic benefits is consistent with mainstream economic
theory and corroborated by evidence. For example, theory posits that
financial market prices respond quickly to new information. Delays in
executing trades have been shown to be costly. Advance notice of a
blackout in trading enables affected participants to adjust their
positions to manage their exposure to such costs. The benefits are
expected to

[[Page 64770]]

outweigh the costs of the statute and the interim final rule.

    Administrators of about 85,150 affected plans are estimated to
incur costs of approximately $13.9 million each year to prepare and
distribute blackout notices to 12 million covered participants. This
total consists of about $8 million per year for 295,000 small plans (an
average of about $110 per plan), and $5.8 million per year for 45,000
large plans (an average of about $510 per plan). These costs are
primarily attributable to the effect of the statutory provisions, and
would in fact be estimated to be greater in the absence of a model
notice due to higher notice preparation time. Because plans commonly
provide advance notice of blackout periods voluntarily, much of this
cost is inherent in normal business practice, and the incremental cost
of the advance notice requirement will be less than total estimated
here. Because the costs of the statute arise from notice provisions,
the data and methodology used in developing these estimates are fully
described in the Paperwork Reduction Act section of this statement of
regulatory impact.

Request for Comments

    The Department is interested in receiving comments from the public
concerning the assumptions used in developing these estimates.
Additional information as to the likely frequency of blackout periods,
and other circumstances that might give rise to blackout periods would
be particularly useful for informing any future decisions about the
timing or content of the blackout notices. Identification of sources of
variability in the costs and benefits of providing notices and of
potential differential impacts on small plans would also be useful.

Executive Order 12866

    Under Executive Order 12866 (58 FR 51735), the Department must
determine whether a regulatory action is "significant" and therefore
subject to review by the Office of Management and Budget (OMB). Section
3(f) of the Executive Order defines a "significant regulatory action"
as an action that is likely to result in a rule (1) having an annual
effect on the economy of $100 million or more, or adversely and
materially affecting a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities (also referred to as
"economically significant"); (2) creating serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlement
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or (4) raising novel legal or policy issues arising
out of legal mandates, the President's priorities, or the principles
set forth in the Executive Order. It has been determined that this
interim final rule is significant within the meaning of section 3(f)(4)
of the Executive Order. OMB has, therefore, reviewed the interim final
rule pursuant to the Executive Order.

Paperwork Reduction Act

    The Department of Labor has submitted the information collection
request (ICR) included in this interim final rule (the Notice of
Blackout Period under ERISA) to OMB for review and clearance in
accordance with the emergency review procedures of the Paperwork
Reduction Act of 1995 (PRA 95). Emergency clearance is likely to be
necessary in order to allow time to consider public comments and obtain
OMB approval for the ICR by the effective date of the notice
requirement of the SOA (180 days after the date of enactment, or
January 26, 2003). OMB approval has been requested by November 20,
2002. A copy of the ICR with applicable supporting statement may be
obtained by calling the Department of Labor, Ms. Marlene Howze, at
(202) 693-4158, or by e-mail to Howze-Marlene@dol.gov.

    Comments and questions about the ICR should be submitted to the
Office of Management and Budget, Office of Information and Regulatory
Affairs, ATTN: Desk Officer for the Pension and Welfare Benefits
Administration, Room 10235, 725 17th Street, NW, Washington, DC, 20503
((202) 395-7316). Comments should be submitted to OMB by November 20,
2002 to ensure their consideration.

    The Department and OMB are particularly interested in comments
that:

    [sbull] Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;

    [sbull] Evaluate the accuracy of the agency's estimate of the
burden of the proposed collection of information, including the
validity of the methodology and assumptions used;

    [sbull] Enhance the quality, utility, and clarity of the
information to be collected; and

    [sbull] Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.

    The information collection provisions of this interim final rule
are found in paragraphs (a), (b)(2)(ii)(A) and (B), (b)(2)(iv), (b)(4),
and (c)(1). A model notice is provided in paragraph (e) to facilitate
compliance and moderate the burden associated with supplying notices to
participants and beneficiaries as described in the interim final rule.
Use of the model notice is not mandatory, and the addition of other
relevant information to the advance notice should not be viewed as
restricted by the model. This interim final rule provides implementing
guidance on the SOA, which, as it pertains to individual account plans
under ERISA, generally requires that plan administrators provide
affected participants and beneficiaries of individual account plans
with advance notice of the commencement of a blackout period. A
blackout period is a period of at least 3 business days during which
participants' and beneficiaries' otherwise available ability to direct
the disposition of assets in their accounts is suspended or restricted.
The SOA also requires that the plan administrator provide notice to
issuers of employer securities that are subject to a blackout period
applicable to a plan. This is a general description for purposes of PRA
95; the provisions of the interim final rule should be relied upon for
compliance with the SOA and this implementing guidance.

    In order to estimate the potential costs of the notice provisions
of section 101(i) of ERISA and this interim final rule, the Department
tabulated the number of participant-directed individual account plans
and the number of participants, inactive participants and beneficiaries
who have not taken distributions, in those plans using the plans' Form
5500 filings for 1998, the most recent year currently available. The
Department then projected these counts forward to produce estimates of
participant-directed individual account plans and participants for
2002. The projections were based on historical growth of all individual
account plans because reliable counts of participant-directed plans are
not available for years prior to 1997.

    The Department assumed linear growth in the number of plans equal
to the rate observed for all small and large individual account plans
between 1992 and 1998, producing estimates of 295,000 small and 45,000
large

[[Page 64771]]

participant-directed individual account plans in 2002 (totaling
341,000). To project the number of participants in these plans, the
Department assumed linear growth in the ratio of participants to total
private employment equal to the rate observed in that ratio between
1992 and 1998. The projected ratios for small and large plans in 2002
were applied to total private employment in July 2002 as estimated by
the U.S. Bureau of Labor Statistics, producing estimates of 7.4 million
small and 40.4 million large plan participants (totaling 47.8 million)
in 2002 that would potentially be affected by a blackout period notice
requirement.

    An assumption was then needed to account for the fact that not all
potentially affected plans will impose blackout periods that would
trigger the notice requirement, and not all of those imposing blackout
periods would do so in any given year. The Department reviewed
available literature in an effort to establish a reasonable estimate of
the frequency of the imposition of blackout periods that would trigger
notice requirements. One small survey of administrators of very large
plans indicated that their largest plans had undergone a blackout
period at a rate of once each 3 to 4 years. A different survey
indicated a lower frequency of blackout periods, at a rate in the area
of about 7% of plans per year. No comprehensive statistics on this
frequency are available. However, the Department is aware that the
imposition of blackout periods is not rare. For this purpose, the
Department has assumed that potentially affected plans will impose
blackout periods on average once each 4 years. Among these, some will
not impose blackout periods, some will impose blackout periods that do
not trigger the notice requirement (e.g., a temporary suspension for a
period of 3 or less consecutive days), and some may have blackout
periods more frequently.

    The Department believes that the assumption that 25% percent of
potentially affected plans will impose a blackout period in any given
year results in a reasonable estimate of the number of plans that will
actually be affected. However, the Department requests comments and any
additional information that would validate or otherwise inform this
assumption. The resulting numbers of plans and participants assumed to
be affected by the notice provisions annually are 85,150 and about 12
million, respectively.

    It is assumed that the availability of a model notice as provided
in paragraph (e) will lessen the time otherwise required to draft a
required notice. In developing burden estimates, the Department has
allowed one-half hour for drafting of the elements of the form by the
plan administrator, and one hour for legal review of the drafted
notice, the latter expense to be incurred as a payment of fees for
outside services. This accounts for the burden of preparing the notice,
which is estimated at 42,600 hours, and $6.4 million. No additional
preparation time is accounted for to draft the notice required to be
provided to an issuer of employer securities under paragraph (c),
because this interim final rule requires the content and timing of that
notice to be the same as the notice prepared for the purpose of
paragraph (b)(1). The burden of this notice would be driven by the
number of plans rather than participants, and the notice would be
required in far more limited circumstances than the notice to
participants under paragraph (b)(1), as it pertains only to the
issuer's securities affected by the blackout period in the plan. Only a
small segment of participant directed individual account plans hold
employer securities that would be subject to the requirements of
paragraph (c), on the order of a maximum of about 500 plans per year.
The direct cost of delivering such notices would be negligible.

    The estimated burden for distribution of the notices takes several
factors into account, including an assumed number of participants
affected annually, the number of the notices that will be distributed
electronically, and on paper, and the differential costs of electronic
and paper distribution methods. Estimates of the rate of use of
electronic distribution methods are consistent with those used in
determining the savings associated with the Department's Final Rules
Relating to Use of Electronic Communication and Recordkeeping
Technologies by Employee Pension and Welfare Benefit Plans (67 FR
17264, April 9, 2002). Those participants not calculated to receive
notice electronically are assumed to receive the notice on paper. Paper
distribution is estimated to require one minute per notice for copying
and mailing, plus $0.40 for paper and postage. No time or direct cost
is attributed to electronic distribution methods other than the time
required to prepare the notice, because it is assumed that notices are
drafted in electronic form, plan administrators use existing
infrastructure to communicate electronically, and the cost of
electronic transmission is negligible. Paper notice distribution is
estimated to require 123,500 hours, and cost about $3 million annually.

    The Department considers that this distribution burden estimate is
conservatively high due to the fact that many plans already provide
advance notices in the event of the imposition of a blackout period,
that most blackout periods arise from changes in investment providers
or recordkeepers, and that this advance notice either is or will be
included with other informational materials that would ordinarily be
supplied to participants or beneficiaries to implement that change.

    No additional burden is included for the requirements for written
documentation that is to be dated and signed under paragraphs
(b)(2)(ii)(A) and (B) and (b)(2)(iv). It is assumed that written
documentation is normally maintained in the circumstances described,
and that the burden of adding a signature or providing a limited number
of copies upon request would be negligible.

    Further, no additional burden is estimated for subsequent notices
required due to changes described in paragraph (b)(4). The Department
has no basis for an estimate of the frequency of changes in the length
of blackout periods. Further, the Department believes that plan
administrators would typically inform participants of changes in the
duration of a blackout period as part of their reasonable and customary
business practices, although content and timing might be modified based
on the provisions of the SOA and this interim final rule.

    The resulting estimates of annual respondents, responses, and hour
and cost burden are shown below.

    Type of Review: New.

    Agency: Department of Labor, Pension and Welfare Benefits
Administration.

    Title: Notice of Blackout Period under ERISA.

    OMB Number: 1210-NEW.

    Affected Public: Individuals or households; Business or other for-
profit; Not-for-profit institutions.

    Respondents: 85,150.

    Frequency of Response: On occasion.

    Responses: 11,956,000.

    Estimated Total Burden Hours: 166,129.

    Total Annual Cost (Operating and Maintenance): $9,351,400.

    OMB will consider comments submitted in response to this request in
its review of the request for approval of the ICR; these comments will
also become a matter of public record.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA),
imposes

[[Page 64772]]

certain requirements with respect to federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely
to have a significant economic impact on a substantial number of small
entities. For purposes of its analyses under the RFA, PWBA continues to
consider a small entity to be an employee benefit plan with fewer than
100 participants. The basis of this definition is found in section
104(a)(2) of ERISA, which permits the Secretary of Labor to prescribe
simplified annual reporting for pension plans that cover fewer than 100
participants. Because this guidance is issued as an interim final rule
pursuant to the authority and deadlines prescribed in section 306(b)(2)
of the SOA, RFA does not apply, and regulatory flexibility analysis is
not required.

    The terms of the statute pertaining to the required notices to plan
participants and beneficiaries in the event of a blackout do not vary
relative to plan size. This interim final rule addresses the statutory
provisions, which are self-executing and do not afford the Department
with substantial discretion to exercise regulatory flexibility with
respect to small plans. While a cost is expected to be associated
primarily with the statutory provisions, the Department believes that
the interim final rule imposes no additional cost on small plans. The
Department nevertheless wishes to address in its final rulemaking any
special issues facing small plans with respect to blackout notices, and
any alternatives consistent with the objectives of the statute that may
serve to facilitate compliance.

    The Department is issuing and requesting comments on a model notice
in connection with this interim final rule that is intended to assist
with compliance and moderate the administrative burden associated with
these required notices. Available data suggest that about 341,000
plans, or 47% of all plans are potentially impacted by the enactment of
a blackout notice requirement, in that they are individual account
plans that permit any form of individual investment direction.

    The statutory blackout notice requirement will potentially affect a
significant number of small plans. About 87% of the potentially
affected plans are small. However, although most affected plans are
small, the participants in those plans represent only about 16% of the
47.8 million potentially affected participants. Based on the assumption
that plans will impose a blackout period once every four years on
average, about 73,800 small plans and 11,400 large plans will prepare
and distribute notices annually. These affected plans represent about
10% and 2% of all plans, respectively. Affected participants (1.9
million in small plans, and 10.1 million in large plans) represent
approximately 2% and 9% of all plan participants, respectively.

    A required notice is likely to be prepared once for each applicable
blackout period and distributed to the multiple affected participants.
The fixed cost of preparing the notice is estimated at approximately
$100 for both large and small plans. The total cost to affected small
plans for both preparation and distribution is expected to be about
$110 per year. The comparable annual cost to large plans of about $510
is substantially greater due to the greater numbers of participants in
these plans, and the costs attendant to distribution of the notices.

    The Department invites interested persons to submit comments on the
impact of this interim final rule on small entities, and on any
alternative approaches that may serve to minimize impact on small plans
while accomplishing the objectives of the statute.

Congressional Review Act

    The rules being issued here are subject to the Congressional Review
Act provisions of the Small Business Regulatory Enforcement Fairness
Act of 1996 (5 U.S.C. 801 et seq.) and have been transmitted to
Congress and the Comptroller General for review. The rule is not a
"major rule" as that term is defined in 5 U.S.C. 804, because it is
not likely to result in (1) an annual effect on the economy of $100
million or more; (2) a major increase in costs or prices for consumers,
individual industries, or federal, State, or local government agencies,
or geographic regions; or (3) significant adverse effects on
competition, employment, investment, productivity, innovation, or on
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), as well as Executive Order 12875, this interim final rule does
not include any Federal mandate that may result in expenditures by
State, local, or tribal governments, and does not impose an annual
burden exceeding $100 million on the private sector.

Federalism Statement

    Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism and requires the adherence to specific
criteria by federal agencies in the process of their formulation and
implementation of policies that have substantial direct effects on the
States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. This interim final rule does not have
federalism implications because it has no substantial direct effect on
the States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. Section 514 of ERISA provides, with
certain exceptions specifically enumerated, that the provisions of
Titles I and IV of ERISA supersede any and all laws of the States as
they relate to any employee benefit plan covered under ERISA. The
requirements implemented in this interim final rule do not alter the
fundamental reporting and disclosure requirements of the statute with
respect to employee benefit plans, and as such have no implications for
the States or the relationship or distribution of power between the
national government and the States.

List of Subjects in 29 CFR Part 2520

    Employee benefit plans, Employee Retirement Income Security Act,
Pensions, and Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, amend part 2520 of Title
29 of the Code of Federal Regulations as follows:

PART 2520--RULES AND REGULATIONS FOR REPORTING AND DISCLOSURE

    1. The authority citation for part 2520 is revised to read as
follows:

    Authority: 29 U.S.C. 1021-1025, 1027, 1029-31, 1059, 1134 and
1135; Secretary of Labor's Order No. 1-87.

    Sections 2520.102-3, 2520.104b-1 and 2520.104b-3 also issued under
29 U.S.C. 1003, 1171-73, 1185 and 1191-94; and under sec. 101(g)(4),
Pub. L. 104-191, 110 Stat. 1936.

    Sections 2520.104b-1 and 2520.107 also issued under sec. 1510, Pub.
L. 105-34, 111 Stat. 788.

    Section 2520.101-3 also issued under sec. 306(b)(2), Pub. L. 107-
204, 116 Stat. 745.

[[Page 64773]]

    2. Add Sec.  2520.101-3 to subpart A to read as follows:

Sec.  2520.101-3  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 expected beginning date and ending date of the blackout
period;

    (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 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 person 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 beginning or ending date of the blackout period (specified in such
notice pursuant to paragraph (b)(1) of this section), the administrator
shall furnish all affected participants and beneficiaries an updated
notice explaining the reasons for the change in the date(s) 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 accordance with the time frames prescribed in paragraph
(b)(2) of this section. In the event of a change in the beginning or
ending date 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 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.

    (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

[[Page 64774]]

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 change to the plan which provides for a regularly
scheduled suspension, limitation, or restriction which is disclosed to
all affected plan participants or beneficiaries through any summary of
material modifications, any materials describing specific investment
alternatives under the plan, or any changes thereto; or

    (C) Which applies only to one or more individuals, each of whom is
the participant, an alternate payee (as defined in section 206(d)(3)(K)
of the Act), or any other beneficiary pursuant to a qualified domestic
relations order (as defined in section 206(d)(3)(B)(i) of the Act).

    (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 306(b)(1) of the Sarbanes-Oxley Act of 2002.

    (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.

    (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 will begin on [enter date]
and end [enter date].

    4. [In the case of investments affected by the blackout period,
enter the following: During the 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. 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 person 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.

Dated: October 11, 2002.


Ann L. Combs,
Assistant Secretary,
Pension and Welfare Benefits Administration,
U.S. Department of Labor.
[FR Doc. 02-26522 Filed 10-18-02; 8:45 am]
BILLING CODE 4510-29-P

• http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-26522-filed [TEXT]

• http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-26522-filed.pdf [PDF]