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Blackout Period Notice - Apply to Top Hat nonqualified plan?


Guest Remysis

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Guest Remysis

Any views of whether the new blackout period notice requirement applies to nonqualified top hat plans? Assume the plan is of a defined contribution model, permits daily "exchanges" of "investments" and but is limiting them temporarily due to recordkeeper changes. (Please, no comments about whether there is an economic benefit problem here.)

I don't believe the requirement does apply. Even though Title I, Part 1 of ERISA, doesn't have a blanket exclusion for top hat plans like Parts 2-4, the requirement (new ERISA section 101(i)) by its terms only applies to blackout periods involving "individual account plans" defined in ERISA section 3(34). An "individual account plan" is defined as a pension plan providing an individual account for each participant and benefits based solely on amounts contributed to the participant's account and income, etc. Even where the top hat plan follows a defined contribution model with benefits based on notional, bookkeeping accounts, it doesn't seem to fall in that definition. To be a top hat plan, the plan, by definition, is "unfunded" -- technically, don't see how benefits could be "based solely on contributions."

That being said, I'm not sure the policy reasons behind the black out period notice are any different for a nonqualified plan . . . unless you simply conclude that, like the other exclusions from ERISA coverage for top hat plans, the big boys can take of themselves on this issue.

Any opinions or guidance? To the question, "why not just send it, just in case?", I answer "because it will limit our flexibility in communication and timing of the transaction in question."

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Guest Remysis

Thanks, Katherine. I was aware of the regulatory exemption, but it is conditional on making the top hat filing. Granted, all top hat plans should have made this filing, but I'd prefer an exemption that applied by its terms and without this condition. Compliance with the SEC rule isn't our issue.

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Guest Remysis

Yes, Kirk, of course. Didn't see anything but would appreciate direction to anything I might have missed.

Also looked at the SEC regs which excludes from the definition of "individual account plan" something along the lines of "pension plans, including deferred compensation plans, limited to directors of the issuer." Suggests to me, at least for SEC purposes, that a top hat plan would be subject, in theory, to the SEC notice provision. (Although if a blackout on a top hat plan affected 50% of the employer's total plan population, I think you might have a LITTLE problem with top hat status). Certainly suggestive for what result might be under DOL rules, but, given SEC record with understanding ERISA plan (see 16-b rules), I'm not willing to say it is dispositive.

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