Blackout Notice

[nancy]

Our general practice is to discontinue all services for a client once they are more than 90 days behind on paying their bill to us. If we turn off the Web and VRU access should a blackout notice be issued to the participants?

[Harwood]

"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 period of more than three consecutive business days."

[rcline46]

Harwood, we need your opinion on this, your interpretation of the quote as it applies to this situation.

For example, Sarbanes-Oxley requires a 30 day notice before the black-out. How does that relate to suspension of services when the record keeper is not sure when or if they will suspend services.

Is it the record keeper's responsibility to issue the notice, or does it belong soley to the sponsor and/or Plan Administrator and/or Trustee?

[Belgarath]

FWIW - the attorneys out there should probably weigh in on this issue. Assuming your contract with the employer allows you to cancel services for nonpayment of fees within a certain specified timeframe, it seems likely that you should be ok. The Plan Administrator/Trustee has a legal obligation to administer the plan properly. And if you cancel services, due to their failure to remit fees, as allowed/required by your legal agreement with them, then I think THEY are on the hook, and not you. It might possibly be advisable to have some language in your "pay up or else" letter that mentions the ramifications of failure to communicate a "blackout period" properly, but again, I'd run this by legal counsel. Hopefully they will say "nah, don't worry about it!"

[MGB]

I think this definitely requires a blackout notice. However, this would fall under the exception to the timing because it was an unforeseeable timing (up until the TPA pulled the plug, it wasn't for sure it would happen). The notice needs to be sent as soon as practicable once it happens.

[Belgarath]

I absolutely agree that a blackout notice is required. Just wanted to clarify that my response was actually to RClines's question about who was responsible for it.

[Harwood]

The Plan Administrator is responsible and personally liable for the monetary damages. The penalties are huge. If ever qualified legal counsel is called for, this is it.