Blackout notice needed?

[jkharvey]

The employer is going to move from individually directed accounts into a pooled account with trustee direction. Is blackout notice required? Is there something else that participants need to be able to do for this to happen?

[Kevin C]

The investment change won't trigger a blackout since it is permanent. But, you will still have a blackout if distributions or loans are temporarily unavailable for more than 3 business days during the change.

[austin3515]

A lot of times during deconversion, thre is a period of time during which participants cannot change their investments. Since this is the definition of a blackout, you would definitely need the notice.

[Kevin C]

2520.101-3(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 period of more than three consecutive business days.

Changing a participant directed plan into a Trustee directed plan is a permanent suspension of the participants' ability to direct investments, not a temporary one. And, once it is in effect, self direction is no longer available under the terms of the plan. I guess they could create a blackout before the plan becomes Trustee directed, if they wanted to, but why would you do that? As I mentioned before, you still have to be careful about loans and distributions.

[austin3515]

Kevin C -

Imagine the followign "hypothetical" situaiton:

Plan notifies vendor they are leaving to trustee directed

Vendor puts plan into blackout for a week during deconversion

Duyring that week, the DOW tanks 500 points

You didn't do a black out notice.

This is not a position I would like to find myself in... I seriously doubt the DOL would agree with your interpretation.

[Bill Presson]

Kevin C -

Imagine the followign "hypothetical" situaiton:

Plan notifies vendor they are leaving to trustee directed

Vendor puts plan into blackout for a week during deconversion

Duyring that week, the DOW tanks 500 points

You didn't do a black out notice.

This is not a position I would like to find myself in... I seriously doubt the DOL would agree with your interpretation.

When does the plan schedule the liquidation?

Typically the liquidation is within a day or so (just enough to clear pending transactions) of the beginning of the blackout. So in your scenario, the plan will likely be better off because it went to cash at the beginning.

But that's how we would do it.

[austin3515]

It's not uncommon to lock people out for two weeks BEFORE liquidation. I know of at least one major vendor that commits this unspeakable attrocity. Sure, some of the best will do what you suggest, but I think the ones on the older chasse's are much less able to turn this around in a day.

But in Bill's example, clearly there would not be an investment blackout, and probably not one on distirubtions or loans either.

But if there is even a shadow of doubt, with penalties of $1,100 per day per participant, the good advice is to take the extra 20 minutes and disclose what exactly is going to happen.

Edit: Please let us know your exact situation in terms the timing of lockout/liquidation. If it is one of those vendors that does lockout before liquidation, I think it will be important to memorialize that it does indeed take place in these boards for all those searchying in the future!

[Kevin C]

Austin, you are describing a situation where a blackout is being created. I don't understand any advantage to doing it that way.

Why would you need to liquidate the investments while the plan is still self directed? Why not let the participants self direct up to a day or two before the change date and have the Trustees make the investment changes immediately after the plan becomes Trustee directed? The last daily valuation sets the beginning balance for the now Trustee directed plan, so distributions and loans are possible without delay.

[austin3515]

Why not let the participants self direct up to a day or two before the change date and have the Trustees make the investment changes immediately after the plan becomes Trustee directed?

Did you conclude that I was suggesting that the employer impose a blackout? I'm not quite sure where I suggested that my advice was to lock people out of their accounts. What I was trying to convey was that if the RECORDKEEPER locks people out for more than 3 days from making investment elections (which is common) that you have a blackout and require the notice.