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Missed Blackout Notice


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We found out recently that when we changed plans we did not provide the blackout notice to non-employee participants (i.e. former employees). By the time we corrected the error the new plan was up and running.

Does anyone have experience with this or recommend any steps to take? I've seen the $131/day penalty which gets a little pricey when there were ~40 people who didn't get the notice. Appreciate any help. 

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An ERISA § 502(c)(7) penalty [$141 for 2020 or $143 for 2021] is one the Secretary of Labor might assess.

Perhaps the failure you describe might never come to the Labor department’s attention.

Consider advising the plan’s administrator to use extra care in responding to anything any participant asks for.  An EBSA investigation or inquiry is much less likely if no one is unhappy or displeased.

Failing to furnish a required blackout notice breaches a plan administrator’s fiduciary responsibility.  A fiduciary is personally liable to make good losses that result from the fiduciary's breach.  Some lawyers believe a participant, beneficiary, or alternate payee could assert he or she would have made different investment directions had he or she received the proper notice.  See, by analogy, King v. National Human Res. Comm., 218 F.3d 719 (7th Cir. 2000).  Even if a complaint plausibly states such a claim, it might be difficult to prove causation, and to show the amount to be restored to the plan.

Further, ERISA § 413’s statute of repose or statute of limitations might end such an exposure.

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