Blackout Notice - only affects owner

[401(k)athryn]

A plan is an owner only plan until 8/1/2018, at which point an employee become eligible.  The owner has an individual brokerage account, but, starting 8/1/2018 and in going forward, all new contributions will be deposited into individually directed accounts at one of the larger online providers.

The owner's brokerage account balance will be transferred to his new account at the new investment provider, but this will likely not occur until September.  Is a blackout notice required?  It is no longer an owner-only plan, so blackout rules should apply, but the owner is the only participant affected by the blackout, so it seems unnecessary.

[Madison71]

I would agree that if the only participant affected by the blackout is the owner, then a blackout notice is not necessary. 

[Peter Gulia]

Whether and how ERISA’s blackout-notice provision applies might turn on the “plan year”.

 

ERISA § 101(i)(8)(A) defines an individual-account plan for ERISA § 101(i).  That definition excludes a one-participant retirement plan.

 

ERISA § 101(i)(8)(B) defines for ERISA § 101(i)(8)(A) a “one-participant retirement plan” as a plan “that on the first day of the plan year (i) covered only one individual (or the individual and the individual’s spouse) and the individual (or the individual and the individual’s spouse) owned 100 percent of the plan sponsor (whether or not incorporated), or (ii) covered only one or more partners (or partners and their spouses) in the plan sponsor.”

 

The interpretive rule restates those definitions.  29 C.F.R. § 2520.101-3(d)(2)-(3).

 

If those definitions alone do not remove a situation from ERISA’s blackout-notice provision (which might be so if the relevant plan year begins on August 1 or later), consider also whether there is a blackout and, if there is, who it affects.

 

ERISA § 101(i)(1) states:  “In advance of the commencement of any blackout period with respect to an individual[-]account plan, the plan administrator shall notify the plan participants and beneficiaries who are affected by such action in accordance with this subsection.”

 

The interpretive rule somewhat similarly states:  “In accordance with section 101(i) of [ERISA], 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”) . . . in accordance with this section.”  29 C.F.R. § 2520.101-3(a).

 

If, based on the relevant plan year, the plan is not a one-participant retirement plan AND the service change results in a blackout (which might be uncertain on the few facts described above), the plan’s administrator might deliver a notice to the affected participant.

 

ERISA § 101(i) is not the only part of ERISA that might call for a blackout notice or similar communication.  For example, an administrator, trustee, or other fiduciary might use a communication to meet a responsibility under ERISA § 404(a).  Yet the situation 401(k)athryn describes suggests that the plan’s administrator, operated by the employer’s owner, might find that the affected participant already has information about how the change affects his rights under the plan.