Final Rule Relating to Notice of Blackout Periods to Participants and Beneficiaries Pursuant to the Sarbanes-Oxley Act of 2002

[Federal Register: January 24, 2003 (Volume 68, Number 16)]
[Rules and Regulations]
[Page 3715-3729]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ja03-24]

[[Page 3715]]
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Part IV


Department of Labor
Pension and Welfare Benefits Administration
29 CFR Parts 2520, et al.

Final Rule Relating to Notice of Blackout Periods to Participants and
Beneficiaries; Civil Penalties and Conforming Technical Changes on
Civil Penalties Under ERISA; Final Rules

[[Page 3716]]

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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
29 CFR Part 2520
RIN 1210-AA90

Final Rule Relating to Notice of Blackout Periods to Participants
and Beneficiaries

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Final rule.
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SUMMARY: This document contains a final rule under new section 101(i)
of the Employee Retirement Income Security Act of 1974 (the Act or
ERISA). Section 101(i) of ERISA, which was enacted into law on July 30,
2002 as part of the Sarbanes-Oxley Act of 2002 (the SOA), provides that
written notice is to be provided to affected participants and
beneficiaries of individual account plans of any "blackout period"
during which their right to direct or diversify investments, obtain a
loan or obtain a distribution under the plan may be temporarily
suspended. The final rules provide guidance to plan sponsors,
administrators, participants and beneficiaries regarding the
requirements for furnishing notices of blackout periods in individual
account pension plans.

DATES: Effective date: This final rule is effective January 26, 2003.
Applicability date: This final rule shall apply to blackout periods
commencing on or after January 26, 2003.

FOR FURTHER INFORMATION CONTACT: Janet A. Walters, Office of
Regulations and Interpretations, Pension and Welfare Benefits
Administration, U.S. Department of Labor, Washington, DC 20210, (202)
693-8510 (not a toll free number).

SUPPLEMENTARY INFORMATION:

A. Background

    The Sarbanes-Oxley Act of 2002 (the SOA), Pub. L. 107-204, was
enacted on July 30, 2002. Section 306(b)(1) of the SOA amended section
101 of ERISA to add a new subsection (i), requiring that administrators
of individual account plans provide notice to affected participants and
beneficiaries in advance of the commencement of any blackout period.
For purposes of this notice requirement, a blackout period generally
includes any period during which the ability of participants or
beneficiaries to direct or diversify assets credited to their accounts,
to obtain loans from the plan or to obtain distributions from the plan
will be temporarily suspended, limited or restricted. The most common
reasons for imposition of a blackout period include changes in
investment alternatives or recordkeepers, and corporate mergers,
acquisitions, and spin-offs that impact the pension coverage of groups
of participants.

    ERISA section 101(i)(6) provides that the Secretary shall issue
model notices that meet the requirements of subsection (i). A model
notice is included as part of this final rule.

    Section 306(b)(3) of the SOA amends ERISA section 502 to establish
a new civil penalty applicable to a plan administrator's failure or
refusal to provide the blackout notice required by section 101(i) of
ERISA. Final rules implementing this civil penalty appear elsewhere in
today's issue of the Federal Register.

    On October 21, 2002, the Department published an interim final
rule, including a model notice, in the Federal Register (67 FR 64766)
for public comment. The Department received 14 comment letters in
response to its request for comments. Set forth below is an overview of
the final rule and the public comments submitted on the interim final
rule.

B. Overview of Final Rule and Comments

1. General

    Paragraph (a) of Sec. 2520.101-3 of the final rule, like the
interim final rule, describes the general requirement of section 101(i)
of ERISA that administrators of certain individual account plans
provide notice of blackout periods to participants and beneficiaries
whose rights under the plan will be temporarily suspended, limited or
restricted by a blackout period (the "affected participants and
beneficiaries"), as well as to issuers of employer securities held by
the plan.

2. Content of the Notice Sec. 2520.101-3(b)(1)

    Paragraph (b)(1) of Sec. 2520.101-3 of the final rule, like the
interim final rule, sets forth the content requirements for notices to
be furnished to affected participants and beneficiaries. Paragraph
(b)(1) provides that the notices shall be written in a manner
calculated to be understood by the average plan participant and sets
forth the specific content requirements applicable to the notices. The
content requirements of the regulation essentially track the
requirements of section 101(i)(2)(A) of the Act. Paragraph (b)(1)(ii),
like the interim final rule, provides that the notice must include a
description of the rights otherwise available under the plan to
affected participants and beneficiaries that will be temporarily
suspended during the blackout period, in addition to the identification
of the investments subject to the blackout period.

    Paragraph (b)(1)(iii) requires that the notice set forth
information concerning the length of the blackout period. The interim
final rule required that the notice set forth the expected beginning
date and ending date of the blackout period. A number of commenters
expressed concern about the difficulty of projecting thirty or more
days in advance the specific beginning and ending dates of a blackout
period, noting that a wide range of events (e.g., problems with plan
records or recordkeeper, extensive document reviews and data
reconciliation, required modifications to systems and software) that
may affect actual dates. As a result of such events, commenters state
that specific dates are likely to be missed, and updated notices with
their attendant costs would have to be furnished. In an effort to avoid
this problem, sponsors and fiduciaries may be encouraged to establish
unnecessarily long blackout periods, thereby depriving participants and
beneficiaries of their right to exercise their affected rights for a
longer period of time. To address this problem, commenters suggested
that the notice be permitted to identify a range of dates during which
the blackout period might begin and end. The suggestions included: A
range of plus or minus 3 business days, 5 days, 7 days; identification
of the "week of ----" during which blackout period might begin and
end; and a description of events that might result in the end of the
blackout period. Some commenters suggested that where a range of dates
is provided, participants also would be furnished a toll-free number or
web site that would enable them to determine the specific date on which
the blackout period began and ended. One commenter suggested that where
other than a specific date is given in the notice, a subsequent less
formal notice should be provided to inform the participants of the
beginning or ending of the blackout.

    The Department continues to believe that it is important that
participants and beneficiaries have sufficiently specific information
to factor the duration of the blackout into their pre-blackout period
investment and other decisions and to apprise participants and
beneficiaries as to when they will be able to recommence exercising
their rights

[[Page 3717]]

under the plan. However, the Department also recognizes the difficulty
of projecting specific beginning and ending dates thirty or more days
in advance of a blackout period and that there may be significant costs
to providing updated notices, most or all of which will be charged to
the individual accounts of the plans' participants.

    The Department is persuaded that allowing a limited range of dates
for purposes of defining the beginning and ending dates for a blackout
period in the required notice will serve to provide participants and
beneficiaries with adequate pre-blackout period planning information,
provided that they also have access during such dates to information to
determine whether the blackout period has begun or ended. In addition,
the Department is persuaded that such an approach will help to reduce
plan administrative costs that might otherwise result from multiple
notices; thereby preserving assets for the retirement security of plan
participants and beneficiaries.

    As amended, paragraph (b)(1)(iii) permits the notice to describe
the length of the blackout period by reference to either: (A) The
expected beginning date and ending date of the blackout period; or (B)
the calendar week during which the blackout period is expected to begin
and end, provided that during such weeks information as to whether the
blackout period has begun or ended is readily available, without
charge, to affected participants and beneficiaries, such as via a toll-
free number or access to a specific web site, and the notice describes
how to access the information.

    The Department decided to permit reference to "the calendar week"
because, unlike 3 or 5 or 7 day, plus or minus, ranges, it provides
both the flexibility for plan administrators and a clearer degree of
certainty for plan participants and beneficiaries. As reflected in the
description of the change, specific information must be readily
available, without charge, to participants and beneficiaries during the
identified "week of----" as to whether the blackout has begun or
ended. The regulation provides examples as how this requirement can be
satisfied, namely via a toll-free number or access to a specific web
site. "Calendar week" is defined in the regulation, at paragraph
(d)(5) to mean "a seven day period beginning on Sunday and ending on
Saturday."

    For example, in the case of a plan that expects to have a four week
blackout period beginning February 10, 2003 and ending March 7, 2003,
the notice of the blackout period could, in accordance with the final
rule, indicate that the blackout period for the plan will begin "the
week of February 9, 2003 and end the week of March 2, 2003." The
notice also would have to indicate the means by which participants and
beneficiaries can determine, during the weeks of February 9 and March
2, whether the blackout period has begun or ended. It is the view of
the Department that, given the benefits to affected participants and
beneficiaries of specific beginning and ending dates, the regulation
should not be construed to preclude the use of a specific beginning
date and a "week of ----" ending date, or the converse.

    The Department notes that, in the case of a plan that permits
participants to exercise their rights up to the commencement of the
blackout period (e.g., as might be the case where participants are
permitted to trade daily), the timing of the advance notice must be
calculated back from the earliest possible beginning date identified in
the notice. For example, in the case of a plan identifying the blackout
period as beginning the "week of February 9," February 9 will be the
beginning of the blackout period for purposes of applying the timing
rule of the regulation.

    The Department has modified paragraph 3 of the model notice (at
paragraph (e)(2) of the final rule) to reflect the availability of
alternative approaches to describing the length of the blackout period.

    Finally, some commenters noted that blackout periods often affect
certain rights longer than others (e.g., a 20 day blackout for loans
and a 10 day blackout for distributions and investment changes) and
requested clarification that one notice describing the different
blackout periods is permitted under the regulation. There is nothing in
the regulation that is intended to limit the ability of plan
administrators to use a single notice to describe different blackout
periods, provided that the advance notice and other requirements of the
regulation can be satisfied with respect to such blackout periods.

    Paragraph (b)(1)(iv) of the final rule, like the interim final
rule, requires the inclusion of a statement advising participants and
beneficiaries to review their current investments in light of their
inability to direct or diversify their assets during the blackout
period and provides that use of the advisory statement contained in
paragraph 4 of the model notice (at paragraph (e)(2)) will satisfy this
content requirement for the notice.

    With regard to paragraph 4 of the model, commenters requested a
clarification that the sentences relating to the risks of investments
in individual securities are not required in those instances where a
plan does not permit investments in such securities. Paragraph 4 of the
model in the final rule, therefore, has been modified to clarify that
the last two sentences are required only where the plan permits
investments in individual securities.

    Section 101(i)(2)(A)(v) of the Act provides that the notice shall
contain "such other matters as the Secretary may require by
regulation." In this regard, the Department added, for purposes of the
interim final rule, two informational items.

    First, given the importance of adequate advance notice of blackout
periods to plan participants and beneficiaries, paragraph (b)(1)(v) of
the interim final rule provided that, where notices are furnished less
than 30 days in advance of the last date on which affected participants
and beneficiaries could exercise affected rights immediately before the
commencement of the blackout period, the notice must contain a general
statement concerning the Federal law requirement of 30 days advance
notice and an explanation as to why such notice could not be furnished.
The requirement for a general statement in paragraph (b)(1)(v)(A) would
be satisfied if the notice contains the general statement appearing in
paragraph 5(A) of the model notice (at paragraph (e)(2)). Paragraph
(b)(1)(v) would not apply to the exceptions in paragraph (b)(2)(ii)(C)
involving blackout periods in connection with mergers, acquisitions,
divestitures, or similar transactions inasmuch as notices of such
blackout periods are required to be furnished as soon as reasonably
possible. (See ERISA section 101(i)(3).) The Department received no
comments on paragraph (b)(1)(v) and is adopting the provision without
change in the final rule.

    Second, the Department had determined that the notice should
contain the name, address and telephone number of a person who can
answer questions concerning the blackout period. Specifically,
paragraph (b)(1)(vi) provided that the notice must contain the name,
address and telephone number of the plan administrator or other person
responsible for answering questions regarding the blackout period. The
Department received one comment on this provision requesting a
clarification that the contact person is not required to be an
individual and could be the department employing the individual who
would be answering questions (such as the benefits department). The
regulation is not intended to require the

[[Page 3718]]

identification of a specific person. Rather, the regulation is intended
to require the identification of a sufficiently specific source for
answering questions concerning the blackout period that participants
and beneficiaries will not be confused as to whom their questions
should be addressed. The Department has modified paragraph (b)(1)(vi)
of the final rule and paragraph 6 of the model notice (at paragraph
(e)(2) of the final rule) by substituting "contact" for "person" to
clarify this matter.

    Finally, two commenters requested a clarification that notice of
blackout periods may be furnished with other information, such as
information relating to the change in service providers. There is
nothing in the regulation that is intended to preclude blackout notice
information from being furnished with other plan information, including
benefit statements. However, given the importance of the blackout
notice information to participants and beneficiaries, plan
administrators should take steps to ensure that the blackout notice
information is prominently identified in the furnished materials.

3. Timing of the Notice Sec. 2520.101-3(b)(2)

    Paragraph (b)(2) of the final rule, like the interim final rule,
describes the timing requirements applicable to furnishing the notice
to affected participants and beneficiaries. Paragraph (b)(2)(i) of the
interim final rule provided that notice shall be furnished at least 30
days, but not more than 60 days, in advance of the last date on which
affected participants and beneficiaries could exercise their affected
rights immediately before the commencement of any blackout period. Some
commenters indicated that the 30 day window created by the regulation
within which to provide notices to affected participants and
beneficiaries was not sufficient to prepare and furnish notices and
suggested that the regulation extend the 60 day maximum period for
furnishing advance notice to 90 days. One commenter suggested changing
the minimum notice requirement to 45 days and the maximum period to 90
days, while another commenter suggested changing the minimum
requirement to 60 days and the maximum requirement to 90 days to enable
furnishing of the notice with quarterly benefit statements. After
careful consideration of the comments on this provision, the Department
has determined to retain the provision of the interim final rule
without change.

    The Department continues to believe that the 30 day minimum and 60
day maximum advance notice requirements of the interim final rule serve
to ensure that affected participants and beneficiaries have
sufficiently timely notice to enable them to both to consider the
effects of the blackout period on their investments and financial plans
and to take action, if appropriate, in anticipation of the blackout
period. The 30-day minimum notice requirement is based on the statutory
standard set forth in section 101(i)(2)(B) of ERISA. The 60-day maximum
period is intended to ensure that notice is not furnished so far in
advance of the commencement date so as to undermine the importance of
the notice to affected participants and beneficiaries. The Department
is concerned that if the only blackout notice is furnished 90 days in
advance, many participants and beneficiaries would be inclined to defer
consideration of the effects of the period on their individual accounts
and some would, by virtue of the passage of time, forget altogether. As
noted in the preamble to the interim final rule, there is nothing in
the regulation that precludes an administrator from supplementing the
requirements of the regulation, by furnishing earlier or more frequent
notices than that required by regulation, provided that at least one
notice is provided to participants and beneficiaries that complies with
the timing and content of the rule. The Department also notes that, in
most instances, plan administrators will have the flexibility to
determine a beginning date for the blackout period that would permit
timely notification of the blackout period to be made with the
quarterly benefit statements furnished to affected participants and
beneficiaries.

    Like the interim final rule, the final rule requires that the
notice periods be counted back from the last date on which the
participant or beneficiary could exercise the affected rights
immediately before the commencement of the blackout period. One
commenter requested a clarification that the time period must take into
account implementation of the exercised rights of the participant or
beneficiary. The point of the advance notice is to enable participants
and beneficiaries to take action in anticipation of a blackout period.
Accordingly, merely affording participants or beneficiaries the
opportunity to give investment instruction, or request a loan, or
request a distribution without the ability to have such instruction or
request implemented prior to the blackout period would be contrary to
both the regulation and the statute. Therefore, plan administrators
must take into account plan requirements, procedures and other factors
that may affect implementation of participant or beneficiary
instructions or requests in determining the last date on which
participants and beneficiaries could exercise the affected rights
before the commencement of the blackout period.

    The timing rules are exemplified by the following. In the case of
an individual account plan that provides for daily trading, the 30-day
period would be counted back from the date immediately preceding the
commencement of a blackout period affecting the right to trade. In the
case of a plan that permits participants to direct their investments
during the first fifteen days of each month, if a plan administrator
determines that in order to change recordkeepers, participant direction
of their investments will have to be suspended from the 1st to the 15th
of May. If the 30-day notice period were counted from the date
immediately preceding the commencement of the blackout period, notice
could be provided on April 1st, thereby affording participants only 15
days (April 1st-15th) to consider and take action in anticipation of
the blackout period. Under the regulation, notice is required to be
furnished at least 30 days in advance of the last date on which
participants could exercise the affected rights immediately before the
commencement of the blackout period. In the immediate example, the last
date on which participants could take action in anticipation of the
blackout period would be April 15th; accordingly notice would have to
be provided to participants not later than March 16th.

    As with the interim final rule, all references in the regulation to
"days" are references to calendar days, not business days, unless
specifically noted otherwise.

    Like the interim final rule, the final rule, at paragraph
(b)(2)(ii)(A) and (B), sets forth two circumstances under which the 30-
day advance notice requirement does not apply. The first circumstance
is where a deferral of the blackout period would result in a violation
of the exclusive purpose and prudence requirements of section
404(a)(1)(A) and (B) of the Act. For example, the ABC Company has
announced that it is filing Chapter 11 bankruptcy. The ABC company's
401(k) plan has ABC common stock as one of its investment options. F,
the 401(k) plan fiduciary and administrator, determines that, given
this event, it would be prudent to temporarily

[[Page 3719]]

suspend investments in the ABC company stock, effective immediately. In
such a situation, F would not, pursuant to Sec. 2520.101-
3(b)(2)(ii)(A), be required to give 30 days notice to the affected
participants and beneficiaries, but would be required to notify them in
writing as soon as possible of the blackout period.

    The second circumstance under which the 30-day advance notice
requirement does not apply is where commencement of the blackout period
is due to events that were unforeseeable or circumstances that were
beyond the control of the plan administrator. For example, the DEF
company's profit-sharing plan's recordkeeper has informed plan
administrator G that due to a major computer failure, the computer
program for recording and processing loans and distributions from the
plan has been incapacitated and that it will take approximately ten
days to fix the system. In such a situation, G would not, pursuant to
Sec. 2520.101-3(b)(2)(ii)(B), be required to give 30 days' notice to
the affected participants and beneficiaries of their temporary
inability to receive loans and distributions from the plan, but would
be required to notify them as soon as reasonably possible, unless G
determines that such notice in advance of the termination of the
blackout is impracticable. The Department anticipates that plan
administrators will rely on this exception only in rare circumstances.
In this regard, the Department notes that problems attendant to changes
in recordkeepers will rarely be unforeseeable or beyond the control of
the plan.

    In both of the foregoing circumstances, a plan fiduciary, which can
be the plan administrator, must make a written determination with
respect to the exceptions to the 30-day advance notice requirement.
Like the interim final rule, paragraph (b)(2)(iv) of the final rule
requires that such determinations be dated and signed by a plan
fiduciary.

    Section 101(i)(3) of ERISA provides that in any case in which a
blackout period applies only to one or more participants or
beneficiaries in connection with a merger, acquisition, divestiture, or
similar transaction involving the plan or plan sponsor and occurs
solely in connection with becoming or ceasing to be a participant or
beneficiary under the plan by reason of such merger, acquisition,
divestiture, or similar transaction, the 30-day advance notice
requirement shall be treated as met if the notice is furnished to such
participants and beneficiaries to whom the blackout period applies as
soon as reasonably practicable. Like paragraph (b)(2)(ii)(C) of the
interim final rule, the final rule makes clear that notice to such
participants and beneficiaries is an exception to the general rule that
the 30-day notice be furnished to all affected participants and
beneficiaries.

    One commenter requested that the foregoing exception be extended to
situations where the affected participants participate in both plans
immediately before a plan merger and to situations where a plan merger
or spin-off is not the result of a corporate merger, acquisition,
divestiture or similar transaction. The Department believes that the
exception at issue was intended to be applied to the narrow
circumstances set forth in the statute. Moreover, the Department is not
persuaded, on the basis of the information provided, that the burdens
attendant to providing advance notice in the circumstances described by
the commenter outweigh the benefits of the notice to affected
participants and beneficiaries.

    Paragraph (b)(2)(iii), like the interim final rule, provides that,
in any case in which the 30-day advance notice rule is not required to
be applied, the administrator is required to provide notice as soon as
reasonably possible under the circumstances, unless such notice in
advance of the termination of the blackout period is impracticable. If,
therefore, a plan administrator or other fiduciary concludes under such
circumstances that notice could not be furnished in sufficient time in
advance of the termination of the blackout period to alert participants
and beneficiaries of the termination date and resumption of plan
rights, no notice would be required to be provided under this section.
Such might be the case where the need for a blackout period is
determined only a few days before the beginning of the blackout period
and the blackout period is only a few days in duration.

    One commenter requested as a clarification as to whether the
ability to furnish sufficient advance notice is determined by reference
to the ability of the plan administrator to provide such notice to all
affected participants and beneficiaries. It is the view of the
Department that paragraph (b)(2)(iii), as well as paragraph (b)(4)
relating to changes in the length of the blackout period, require that
an administrator take steps to furnish notice as soon as reasonably
possible to all affected participants and beneficiaries and, therefore,
to the extent that an administrator has the ability to furnish notice
to some participants and beneficiaries earlier than other participants
and beneficiaries, which may be the case where electronic disclosure is
available, the administrator has an obligation to provide such notice,
even though providing advance notice to other participants and
beneficiaries (e.g., by mail) may be impracticable.

    Two commenters suggested that the timing rules should not apply
with respect to new participants inasmuch as furnishing such notice as
part of the plan enrollment package might be a problem because
different third-party vendors may prepare the materials and, in
addition, new participants are likely to have little, if any, funds
that would be affected by the blackout period. The Department is not
persuaded that administrative burdens and small account balances
justify an exception to the timing rules for new plan participants.
Accordingly, no exception from the timing requirements has been adopted
for new participants. The Department notes, however, that if an
employee becomes a participant after blackout notices have been
furnished to the plan's participants and beneficiaries, the
administrator would be required to furnish a notice to the newly
eligible employee as soon as reasonably possible pursuant to the
exception in Sec. 2520.101-3(b)(2)(ii)(B).

4. Form and Manner of Furnishing Notice Sec. 2520.101-3(b)(3)

    Like the interim final rule, paragraph (b)(3) of the final rule
provides that the blackout notice must be in writing and may be
furnished in any manner permitted under 29 CFR 2520.104b-1, including
through electronic media. One commenter indicated that the "reasonably
accessible" standard of the SOA is intended to be broader than the
standards under Sec. 2520.104b-1 and the regulation, therefore should
be modified accordingly. The Department disagrees with the commenter's
interpretation of the statute. It is the view of the Department that
the standards set forth in Sec. 2520.104b-1(c), relating to the use of
electronic media, are intended to ensure reasonable access to
electronic communications by participants and beneficiaries consistent
with the statute. Accordingly, the provision of the interim final
regulation is being retained without modification.

    In the preamble to the interim final rule, the Department indicated
that a blackout notice will be considered furnished as of the date of
mailing, if mailed by first class mail, or as of the date of electronic
transmission, if transmitted electronically. Two commenters indicated
that the circumstances under which a notice is considered to be
furnished should be

[[Page 3720]]

expanded to include delivery by overnight mail, third class mail,
private delivery services, and interoffice mail. It is the view of the
Department that interoffice mail is essentially hand delivery and,
therefore, a document would not be considered furnished until received
by the participant. On the other hand, the Department agrees that with
the commenters that there are other methods of delivery that should be
accorded the same deference as electronic transmission and first class
mail. In this regard, it is the view of the Department that a blackout
notice will be considered furnished on the date of mailing if it is
accomplished by first class mail, certified mail or Express Mail; or on
the date of delivery to a "designated private delivery service"
within the meaning of 26 U.S.C. 7502(f). In the case of notices
furnished electronically, notices will be considered furnished on the
date of transmission.

    One commenter requested clarification of whether furnishing notice
to the last known address of a participant or beneficiary is
sufficient. Furnishing a notice to the last known address of a
participant or beneficiary would be sufficient where the plan utilizes
a method of delivery described in Sec. 2520.104b-1 and the fiduciaries
of the plan have taken reasonable steps to keep plan records up-to-date
and to locate lost or missing participants.

5. Changes in Length of Blackout Period Sec. 2520.101(b)(4)

    Paragraph (b)(4) describes the notice requirements applicable to
changes in the length of the blackout period. The final rule, like the
interim final rule, provides that the administrator is required to
provide all affected participants and beneficiaries with an updated
notice explaining the reasons for the change in the date(s) and
identifying all material changes in the information contained in the
prior notice. The updated notice must be provided as soon as reasonably
possible, unless such notice in advance of termination of the blackout
period is impracticable. In this regard, the Department reiterates that
to the extent that an administrator has the ability to furnish notice
to some participants and beneficiaries earlier than other participants
and beneficiaries, which may be the case where electronic disclosure is
available, the administrator has an obligation to provide such notice,
even though providing advance notice to other participants and
beneficiaries (e.g., by mail) may be impracticable.

6. Notice to Issuer of Employer Securities Sec. 2520.101-3(c)

    Paragraph (c) of Sec. 2520.101-3 of the final rule, like the
interim final rule, describes the plan administrator's obligation to
provide notice of a blackout period to the issuer of employer
securities held by the plan and subject to the blackout period.
Paragraph (c)(1) generally provides that the content and timing
requirements applicable to the furnishing of notices to participants
and beneficiaries also apply to the furnishing of notices to the issuer
of employer securities. As with the interim final rule, it is the view
of the Department that a plan administrator may satisfy its obligation
to notify the issuer by providing the same notice furnished to
participants and beneficiaries. Paragraph (c)(2) provides that the
notice of the blackout period shall be furnished to the agent for
service of legal process for the issuer, unless the issuer has provided
the plan administrator the name of another person for service of such
notice. Paragraph (c)(2) is intended to ensure that there is no
ambiguity as to whom the administrator must serve notice of the
blackout period. Pursuant to section 306(a)(6) of the SOA, issuers are
required to notify directors, executive officers, and the Securities
and Exchange Commission of the blackout period.

    Three commenters suggested that notice to the issuer should not be
required when the plan administrator and issuer are the same person.
The Department does not believe that merely because an issuer and the
plan administrator may, as a technical matter, be the same legal
entity, that the parties will necessarily be privy to the same
information. Nonetheless, there is nothing in the regulation that
precludes an issuer of employer securities from designating the plan
administrator as the party to receive notices of blackout periods. The
Department has amended the regulation, at Sec. 2520.101-3(c), to add a
new subparagraph (3) making clear that where an issuer designates the
administrator as the person to be furnished notice of a blackout
period, the issuer shall be deemed to have been furnished notice on the
same date as notice is furnished to affected participants and
beneficiaries, thereby relieving the administrator of the obligation to
notify itself of a blackout period.

7. Definitions Sec. 2520.101-3(d)

a. "Blackout Period"

    Paragraph (d)(1) of Sec. 2520.101-3 defines the term "blackout
period." The interim final rule adopted the definition set forth in
ERISA section 101(i)(7). The Department received a number of comments
on the interim final regulation requesting clarification of specific
exclusions from the "blackout period" definition, as well as
clarification that certain suspensions, limitations or restrictions
imposed on an individual participant's account do not constitute a
blackout period as contemplated by the statute or regulation.

"Regularly Scheduled" Exclusion

    One commenter requested a clarification that the provisions of
paragraph (d)(1)(ii)(B), relating to "a regularly scheduled
suspension, limitation or restriction," not only applies to those that
are plan changes, but also to preexisting plan features. Another
commenter requested clarification that "a regularly scheduled
suspension, limitation, or restriction" may, for purposes of the
exclusion, be contained in and disclosed via enrollment forms,
investment policies and other documents pursuant to which the plan is
established or operated.

    First, the Department does not believe that Congress, in enacting
ERISA section 101(i)(7), intended to include preexisting regularly
scheduled suspensions, limitations, or restrictions in the definition
of the blackout period to the extent such suspensions, limitations, or
restrictions are disclosed to participants and beneficiaries. In this
regard, the Department notes that section 101(i)(7)(A) of ERISA and
paragraph (d)(1)(i) of the regulation, in defining "blackout period,"
references "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 * * *." (Emphasis
supplied). The Department reads the clause "which is otherwise
available under the terms of such plan" as referring to preexisting
regularly scheduled suspensions, limitations or restrictions. The
Department also notes that the "blackout period" definition contained
in SOA section 306(a)(4), to be administered by the Securities and
Exchange Commission, generally provides that a blackout period does not
include "a regularly scheduled period," if such period is
incorporated into the plan and timely disclosed to employees.
Nonetheless, in an effort to clarify this issue and more closely align
the exclusion in ERISA section 101(i)(7)(B)(ii) with SOA section
306(a),

[[Page 3721]]

the Department has amended paragraph (d)(1)(ii)(B) of the
regulation.\1\
---------------------------------------------------------------------------

    \1\ Section 101(i)(5) of ERISA, as added by SOA section 306(b),
provides that the Secretary may establish by regulation additional
exceptions to the requirements of subsection (i) of section 101 (the
blackout notice requirements) which the Secretary determines are in
the interest of participants and beneficiaries. The Department finds
the amendment to paragraph (d)(1)(ii)(B) of the regulation to be in
the interest of participants and beneficiaries.
---------------------------------------------------------------------------

    As amended, paragraph (d)(1)(ii)(B) excludes from the definition of
blackout period a suspension, limitation or restriction "which is a
regularly scheduled suspension, limitation, or restriction under the
plan (or change thereto), provided that such suspension, limitation or
restriction (or change) has been disclosed to affected plan
participants and beneficiaries through the summary plan description, a
summary of material modifications, materials describing specific
investment alternatives under the plan and limits thereon or any
changes thereto, participation or enrollment forms, or any other
documents and instruments pursuant to which the plan is established or
operated that have been furnished to such participants and
beneficiaries." This amendment also serves to clarify that "regularly
scheduled suspensions, limitations and restrictions" may be set forth
in and disclosed to participants and beneficiaries in a variety of
documents.

    The amendment to paragraph (d)(1)(ii)(B), by reference to
"materials describing specific investment alternatives under the plan
and limits thereon," also is intended to make clear that restrictions
on investments or delays in payment or transfers applicable to
particular investments are encompassed within the exclusion to the
extent disclosed to affected participants and beneficiaries. Similarly,
limits on the ability of participants and beneficiaries to give
investment instruction (such as limits on the ability of participants
to trade daily) would be covered by the exclusion as a "regularly
scheduled suspension, limitation or restriction" to the extent
disclosed to affected participants and beneficiaries.

    A number of commenters requested clarification that quarterly
freezes on trading involving employer stock, timed to coincide with
earnings reports and intended to prevent insider trading, whether fixed
dates or determined on a quarter-by-quarter basis, do not constitute
blackout periods within the meaning of the regulation when plan
materials disclose the dates or explain how the dates will be
determined. It is the view of the Department that such restrictions on
trading employer securities would be "regularly scheduled" to the
extent the event (i.e., release of the company's quarterly earnings
report) and the restriction (freeze on trading employer securities) and
the period of the restriction are described in plan materials and
disclosed to the plan's affected participants and beneficiaries.

QDRO Exclusion

    A number of commenters also expressed concern that the language of
paragraph (d)(1)(ii)(C), relating to suspensions, limitations, or
restrictions as a result of a qualified domestic relations order
(QDRO), did not take into account the obligations of a plan
administrator to impose certain restrictions on the account of a
participant during the pendency of a determination as to whether a
domestic relations order is qualified. Given the specific obligations
imposed on plan administrators pursuant to ERISA section 206(d)(3)(H),
the Department does not believe that Congress, in drafting section
ERISA 101(i)(7)(B)(iii), intended to limit the subject exclusion only
to those restrictions arising after a determination that a domestic
relations order is qualified. Accordingly, the Department has amended
paragraph (d)(1)(ii)(C) to clarify the application of the exclusion to
restrictions imposed during the pendency of a QDRO determination. As
amended, paragraph (d)(1)(ii)(C) excludes a suspension, limitation or
restriction "which occurs by reason of a qualified domestic relations
order or by reason of a pending determination (by the plan
administrator, by a court of competent jurisdiction or otherwise)
whether a domestic relations order filed (or reasonably anticipated to
be filed) with the plan is a qualified order within the meaning of
section 206(d)(3)(B)(i) of ERISA." \2\
---------------------------------------------------------------------------

    \2\ Pursuant to the Department's authority under section
101(i)(5) of ERISA, the Department finds the amendment to paragraph
(d)(1)(ii)(C) to be in the interest of plan participants and
beneficiaries.
---------------------------------------------------------------------------

Individual Participant Actions

    Commenters generally requested clarification that the term
"blackout period" is not intended to include account restrictions
triggered by individual participant actions. Examples of such actions
include: Receipt of a tax levy, a dispute over a deceased participant's
account among putative beneficiaries, failure of a participant to
obtain a PIN number, or allegations that the participant committed a
fiduciary breach or crime involving the plan. It is the view of the
Department that Congress did not intend to encompass within the meaning
of "blackout period" restrictions on investment direction, plan loans
and plan distributions imposed solely in response to an action
involving an individual participant and affecting only the account of
that participant, such as those actions identified in the preceding
sentence. Rather, the blackout notice requirements are intended to
ensure that plan participants and beneficiaries are afforded advance
notice of plan-imposed restrictions on their rights in order that they
may take appropriate steps in anticipation of the restriction. In the
case of actions involving individual participants, the Department
agrees with commenters that the affected participant or beneficiary
typically will already have notice of any restriction and reasons for
such restriction. In response to these comments, the Department has
amended the definition of blackout period at paragraph (d)(2) of the
regulation to clarify that suspensions, limitations and restrictions
precipitated by a participant's action or the action of a third-party
with respect to an individual participant's account are excluded from
the definition of "blackout period." Specifically, new paragraph
(d)(2)(D) excludes from definition of blackout periods, a suspension,
limitation and restriction that "occurs by reason of an act or a
failure to act on the part of an individual participant or by reason of
an action or claim by a party unrelated to the plan involving the
account of an individual participant.\3\
---------------------------------------------------------------------------

    \3\ Section 101(i)(5) of ERISA, as added by SOA section 306(b),
provides that the Secretary may establish by regulation additional
exceptions to the requirements of subsection (i) of section 101 (the
blackout notice requirements) which the Secretary determines are in
the interest of participants and beneficiaries. The Department finds
this amendment to paragraph (d)(2) of the regulation to be in the
interest of participants and beneficiaries.
---------------------------------------------------------------------------

Permanent Restrictions

    Commenters, noting that the definition of "blackout period"
refers to rights that are "temporarily suspended, limited or
restricted," requested clarification that permanent elimination of
certain rights would not constitute a "blackout period." Examples
cited by the commenters included: Permanent restriction on new
contributions to an investment option, replacement of one investment
option with another of a similar type, and termination of the plan. The
Department agrees that the blackout notice requirements were not

[[Page 3722]]

intended to apply to rights that are eliminated, as opposed to
temporarily suspended, limited or restricted. Accordingly, a permanent
restriction on new contributions to an investment option, replacement
of one investment option with another, a plan termination and similar
types of permanent restrictions would not in and of themselves be
events that give rise to a blackout notice obligation under the
regulation. However, if, in connection with implementing a permanent
restriction, some rights would be temporarily suspended, limited or
restricted, the blackout notice requirements would apply to such
temporary restriction. For example, in replacing investment option A
with investment option B, the plan permanently restricts new
contributions to option A and during the transfer of funds from option
A to option B temporarily suspends participant direction of the funds
transferred to option B for 5 days during which transfers and accounts
will be reconciled. In this situation, the restriction on new
contributions to option A would not constitute a blackout period, but
the 5 day temporary restriction on the direction of funds in option B
would constitute a blackout period with respect to which notice must be
provided under the regulation. On the other hand, if there was no
restriction on the direction of funds in option B or if the restriction
was for 3 or fewer consecutive business days, there would be no
blackout period with regard to such funds under the regulation.

    One commenter requested a clarification that a blackout period does
not occur solely because of the bankruptcy of an employer and the
appointment of a bankruptcy trustee or as a result of abandonment of a
plan by the plan sponsor. Such actions would, in the view of the
Department, result in a blackout period only if the rights of
participants and beneficiaries to direct investments, obtain a loan or
obtain a distribution are temporarily suspended, limited or restricted
within the meaning of the regulation. In the event there is a blackout
period in connection with such actions, notice would have to be
provided by the plan administrator or the party assuming the
responsibilities of the plan administrator.

    One commenter requested clarification that the definition of
"blackout period" does not extend to suspensions, limitations or
restrictions of services (such as investment education, investment
advice, retirement counseling, financial planning) that may facilitate
the exercise of a participant's and beneficiary's right to diversify
their assets, obtain a loan or obtain a distribution. It is the view of
the Department that to the extent such services are not required in
order for a participant or beneficiary to exercise his or her right to
direct investments, obtain a loan or obtain a distribution, the
suspension, limitation or restriction of such services would not give
rise to a blackout period within the meaning of the regulation.
b. "One-Participant Retirement Plan"

    As with the interim final rule, the final rule adopts the statutory
definition of "one-participant retirement plan" set forth in section
101(i)(8)(B) of ERISA, as amended by section 306(b)(1) of the SOA. One
commenter suggested the definition of "one-participant retirement
plan" be amended to apply the definition in 29 CFR Sec. 2510.3-
3(c)(1) and (2) for purposes of the blackout notice requirements. The
Department has not adopted this suggestion and retained the statutory
definition "one-participant retirement plan" without change.
c. "Issuer"

    Like the interim final rule, paragraph (d)(4) of the final rule
defines the term "issuer" for purposes of the blackout notice
provisions. Consistent with the provisions of section 2(a)(7) of the
SOA, issuer means an issuer as defined in section 3 of the Securities
Exchange Act of 1934 (15 U.S.C. 78c),\4\ the securities of which are
registered under section 12 of the Securities Exchange Act of 1934, or
that is required to file reports under section 15(d) of the Securities
Exchange Act of 1934, or files or has filed a registration statement
that has not yet become effective under the Securities Act of 1933 (15
U.S.C. 77a et seq.), and that it has not withdrawn.
---------------------------------------------------------------------------

    \4\ Section 3 of the Securities Exchange Act of 1934 defines the
term "issuer" to mean any person who issues or proposes to issue
any security; except that with respect to certificates of deposit
for securities, voting-trust certificates, or collateral-trust
certificates, or with respect to certificates of interest or shares
in an unincorporated investment trust not having a board of
directors or of the fixed, restricted management, or unit type, the
term "issuer" means the person or persons performing the acts and
assuming the duties of depositor or manager pursuant to the
provisions of the trust or other agreement or instrument under which
such securities are issued; and except that with respect to
equipment-trust certificates or like securities, the term "issuer"
means the person by whom the equipment or property is, or is to be,
used.
---------------------------------------------------------------------------

d. Miscellaneous

    In response to requests from two commenters, the Department
provides the following clarifications. First, references to plan
administrator and administrator in the regulation mean the
"administrator" as defined in section 3(16)(A) of ERISA. Second, the
term "affected participant" as used in the regulation means
participants and beneficiaries whose rights under the plan are affected
by the suspension, limitation, or restriction of their right to direct
or diversity assets, obtain a loan or obtain a distribution. Employees
who are eligible but who have not elected to participate in the plan
would not be "affected participants" within the meaning of the
regulation.

8. Model Notice Sec. 2520.101-3(e)

    Paragraph (e) of Sec. 2520.101-3 provides a model notice to
facilitate compliance with the blackout notice requirements by plan
administrators. Use of the model is not mandatory. However, like the
interim final rule, the final rule provides that use of the advisory
statement set forth at paragraph 4 of the model notice will be deemed
to satisfy the notice content requirements of paragraph (b)(1)(iv) of
the rule pertaining to advising participants and beneficiaries about
the importance of reviewing their plan investments in anticipation of
their inability to direct or diversify their investments during the
blackout period. The final rule, like the interim final rule, also
provides that use of the general statement set forth in paragraph 5 of
the model notice will be deemed to satisfy the requirement of paragraph
(b)(1)(v)(A) that the notice contain a general statement that Federal
law requires furnishing of blackout notices in advance of the blackout
period.

    This model is intended to deal solely with the content requirements
prescribed in paragraph (b)(1) and not other matters with respect to
which disclosure may be required, such as changes in investment
options.

    As discussed earlier, the model notice has been revised to
accommodate changes in the final rule. Paragraph 3 of the model
(relating to length of the blackout period) has been changed to reflect
alternative approaches to describing the length of the blackout period
and paragraph 4 (encouraging participants and beneficiaries to review
their investments in anticipation of the blackout period) has been
modified to make clear that the last two sentences of the paragraph
(relating to investments in individual securities) apply only to plans
that offer investments in individual securities. Paragraph 6 of the
model also was modified to make clear that individual persons are not
required to be named as contacts for information about blackout
periods.

[[Page 3723]]

    One commenter suggested that paragraph 4 of the model not be
required when notice is furnished as soon as reasonably possible under
the circumstances, but after the date on which affected participants
and beneficiaries can take action in anticipation of the blackout
period. The Department agrees that including paragraph 4 of the model
in a notice furnished after the date on which participants and
beneficiaries can effectuate changes in anticipation of the blackout
period will be of no value to participants and beneficiaries and,
accordingly, may be deleted.

    One commenter suggested that the model advise participants of the
tax consequences relating to net unrealized appreciation of employer
securities upon distribution from a plan. The Department believes that,
while such information may be useful to participant, the information
goes beyond the scope of the intended blackout notice. The Department
notes, however, that there is nothing in the regulation which precludes
the furnishing information with the blackout period notice that may be
helpful to plan participants and beneficiaries.

9. Effective Date Sec. 2520.101-3(f)

    Paragraph (f) of Sec. 2520.101-3 sets forth the effective date of
the final rule. Like the interim final rule, paragraph (f) provides
that the rule is effective on January 26, 2003, the effective date of
the SOA section 306 amendments to ERISA. Paragraph (f) provides that
the notice requirements shall apply to blackout periods commencing on
or after January 26, 2003, and that, for blackout periods beginning
between January 26, 2003 and February 25, 2003, plan administrators
shall furnish notice as soon as reasonably possible. This provision is
intended to ensure that a statutorily required notice be provided with
respect to blackout periods which commence before February 26, 2003. In
no event, however, is a blackout notice required to be furnished under
the regulation prior to the January 26 effective date. Pursuant to
section 553(c) of the Administrative Procedure Act, the Department
finds good cause for this rule to be effective less than 30 days after
publication. The Department believes that having the rule effective on
the effective date of the underlying statutory provisions will avoid
confusion for plan administrators. Moreover, the limited extent of the
differences between the instant rule and the interim rules will
minimize any difficulties in complying with the rule by the effective
date.

C. Regulatory Impact Analysis

Summary

    The costs associated with this final rule arise primarily from the
statutory requirement to prepare and distribute advance notices of the
imposition of blackout periods. The aggregate costs for plans required
to provide this notice are estimated to be $13.9 million per year. The
benefits afforded participants and beneficiaries and plan
administrators by the statute and final rule cannot be quantified, but
are expected to be substantial. These requirements will ensure that
notices are always provided, are timely, and have appropriate content.
Economic benefits will accrue to participants or beneficiaries as a
result of their enhanced ability to exercise control over their
retirement plan assets with adequate information to inform their
decisions. The assurance of receiving advance notice of events that may
be critical to participant decisionmaking will increase confidence in
the security of retirement assets and promote plan participation. The
statute and this guidance will also assist plan administrators in their
efforts to fulfill their obligations to participants and beneficiaries.

Benefits and Costs

    The SOA amendments to ERISA and this implementing guidance will
have several important benefits. First, while commenters on the interim
final rule confirm that many plan administrators currently provide
disclosures similar to those required by the statute and interim final
rule, these new requirements will ensure that appropriate information
is provided in a consistent and timely manner.

    This advance knowledge will have economic value and increase
confidence in the security of retirement savings. Timely notice and an
understanding of the reasons for and expected duration of a blackout
period will benefit participants and beneficiaries economically by
offering them ample opportunity to assess their current investment
decisions, and to adjust their exposure to loss if they wish to do so,
to the extent possible within the existing options available under the
plan. Advance notice of blackout periods cannot eliminate fluctuations
of market value during a period when existing investment instructions
cannot be modified. However, notice will allow affected participants
and beneficiaries to maximize their exercise of control as they deem
appropriate in their individual circumstances.

    Assurance of the opportunity to exercise control with adequate
knowledge, in advance of events that will affect their ability to
exercise control, will increase participant and beneficiary confidence
that the plan is being operated appropriately. Participants frequently
express concern when significant changes are made to plan options, or
when rights previously available are temporarily limited. Assuring that
they will have knowledge of the timing and reasons for such changes
should serve to promote confidence in the security of retirement
savings and support continued growth in participation in the retirement
plans offered by plan sponsors.

    Second, guidance on the statutory notice requirement will benefit
plan sponsors and administrators by clarifying the manner in which they
may discharge their obligation to ensure that participants and
beneficiaries have access to information necessary to make informed and
meaningful investment decisions. Blackout periods occur for a variety
of reasons. Their occurrence and timing are often, but not always,
within the control of the plan administrator. The most common reasons
for imposition of a blackout period include changes in investment
alternatives or recordkeepers, and corporate mergers, acquisitions, and
spin-offs that impact the pension coverage of groups of participants.
Plan administrators will wish to ensure that proper accounting and
record transfer is accomplished as timely and accurately as possible,
while at the same time advising participants about important matters
affecting their rights under the plan.

    The value of these benefits cannot be specifically quantified.
However, the conclusion that advance notice of blackout periods
produces economic benefits is consistent with mainstream economic
theory and corroborated by evidence. For example, theory posits that
financial market prices respond quickly to new information. Delays in
executing trades have been shown to be costly. Advance notice of a
blackout in trading enables affected participants to adjust their
positions to manage their exposure to such costs. The benefits are
expected to outweigh the costs of the statute and the final rule.

    Administrators of about 85,150 affected plans are estimated to
incur costs of approximately $13.9 million each year to prepare and
distribute blackout notices to 12 million covered participants. This
total consists of about $8 million per year for 295,000 small plans (an
average of about $110 per plan), and $5.8 million per year for 45,000
large plans (an average of about $510 per plan). These costs are
primarily attributable to the effect of the

[[Page 3724]]

statutory provisions, and would in fact be estimated to be greater in
the absence of a model notice due to higher notice drafting time.
Because plans commonly provide advance notice of blackout periods
voluntarily, much of this cost is inherent in normal business practice,
and the incremental cost attributable to the advance notice requirement
will be less than total estimated here. Because the costs of the
statute arise from notice provisions, the data and methodology used in
developing these estimates are fully described in the Paperwork
Reduction Act section of this statement of regulatory impact.

    Although the Department requested input from the public concerning
the assumptions used in developing these estimates, the likely
frequency of blackout periods, the sources of variability in the costs
and benefits of providing notices, and any potential differential
impacts on small plans, it received a limited number of comments
addressing economic impact. As noted earlier in this preamble, several
commenters indicated that the interim final rule's requirement for the
disclosure of specific beginning and ending dates in the blackout
notice, and a corresponding frequency of the requirement for subsequent
notices arising from the inability to predict specific dates, would add
to the burden of the blackout notice requirement. The Department has
made certain modifications in the final rule to address these concerns.
A comment was also received with respect to the Department's
assumptions with respect to the use of electronic methods of
communication. This comment is addressed in the Paperwork Reduction Act
statement below.

Executive Order 12866

    Under Executive Order 12866 (58 FR 51735), the Department must
determine whether a regulatory action is "significant" and therefore
subject to review by the Office of Management and Budget (OMB). Section
3(f) of the Executive Order defines a "significant regulatory action"
as an action that is likely to result in a rule (1) having an annual
effect on the economy of $100 million or more, or adversely and
materially affecting a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities (also referred to as
"economically significant"); (2) creating serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlement
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or (4) raising novel legal or policy issues arising
out of legal mandates, the President's priorities, or the principles
set forth in the Executive Order. It has been determined that this
final rule is significant within the meaning of section 3(f)(4) of the
Executive Order. OMB has, therefore, reviewed the final rule pursuant
to the Executive Order.

Paperwork Reduction Act

    At the time of publication of the interim final rule, the
Department of Labor submitted the information collection request (ICR)
included in the interim final rule to OMB for review and clearance in
accordance with the emergency review procedures of the Paperwork
Reduction Act of 1995 (PRA 95). OMB subsequently approved the
information collection using emergency clearance procedures on December
5, 2002. This emergency clearance will expire on April 30, 2003. As a
consequence, the information collection included in this final rule is
being submitted at this time for continuing approval. The burden
estimates are unchanged, and terms of the final rule that constitute
collections of information are not substantively or materially changed.
A copy of the ICR with applicable supporting statement may be obtained
by calling the Department of Labor, Ms. Marlene Howze, at (202) 693-
4158, or by e-mail to Howze-Marlene@dol.gov.

    Comments and questions about the ICR should be submitted to the
Office of Management and Budget, Office of Information and Regulatory
Affairs, ATTN: Desk Officer for the Pension and Welfare Benefits
Administration, Room 10235, 725 17th Street, NW., Washington, DC 20503
((202) 395-7316). Comments should be submitted to OMB by February 24,
2003 to ensure their consideration.

    The Department and OMB are particularly interested in comments
that:

    * Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;

    * Evaluate the accuracy of the agency's estimate of the
burden of the proposed collection of information, including the
validity of the methodology and assumptions used;

    * Enhance the quality, utility, and clarity of the
information to be collected; and

    * Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.

Information Collection Provisions

    The information collection provisions of this final rule are found
in paragraphs (a), (b)(2)(ii)(A) and (B), (b)(2)(iv), (b)(4), and
(c)(1). A model notice is provided in paragraph (e) to facilitate
compliance and moderate the burden associated with supplying notices to
participants and beneficiaries as described in the final rule. Use of
the model notice is not mandatory, and the addition of other relevant
information to the advance notice should not be viewed as restricted by
the model. Modifications described earlier in this preamble to
paragraphs (b)(1)(iii)(A) and (B) allowing the use under specific
circumstances of a limited range of beginning and ending dates rather
than specific dates should serve to allow for greater flexibility and
limit the number of follow-up notices required pursuant to paragraph
(b)(4). New paragraph (c)(3) clarifies that where an issuer designates
the plan administrator as the person to receive notice under paragraphs
(c)(1), the plan administrator need not supply this notice separately
to itself. This modification may eliminate the need for duplicate
notification under some circumstances. Neither of these changes is
considered to constitute a substantive or material change to the
existing approved information collection.

Comments

    As noted, the Department received comments concerning the
difficulty of including specific beginning and ending dates in the
notice pursuant to paragraphs (b)(1)(iii), and the applicability of the
notice requirement of paragraph (c) when an issuer designates the plan
administrator as the party to receive notices of blackout periods
affecting securities of the issuer. The Department has addressed these
and other issues raised by commenters with modifications previously
described in this preamble. In addition, one commenter expressed the
view that the Department's estimates were understated to the extent
that they incorporated the use of electronic media for distribution of
the notices. The commenter further stated that the use of electronic
technology for communicating with participants and

[[Page 3725]]

beneficiaries is generally not viable due to the absence of computer
capability in certain industries. While the Department did not describe
its methodology for incorporating electronic disclosure assumptions in
detail in the interim final rule, the methodology does take a variety
of factors into account, including the distribution of plan sponsors
and participants across industries, data related to access to computers
in different industries, survey data on the use of electronic
communication methods by plan sponsors and administrators, and comments
received in response to the Department's Notice of Proposed Rulemaking
on Use of Electronic Communication and Recordkeeping Technologies by
Employee Pension and Welfare Benefit Plans (64 FR 4506, January 28,
1999; finalized April 9, 2002, 67 FR 17264).

    Specifically, in order to develop estimates of distribution
expenses saved through the use of electronic communication
technologies, the Department utilized a Census Bureau household survey
published in 2001 on computer use \5\ and a separate 1999 Census Bureau
household survey \6\ on pension and health benefit plan participation.
Analysis of this information indicates that approximately 21 percent of
participants have appropriate access to electronic media at their
workplaces, and another 38 percent have such access at home. The
pension and health coverage rates were then applied to the computer use
rates industry-by-industry to account for the likelihood that computer
use is greater among plan participants and especially among large plan
participants, because such participants are concentrated in certain
industries (e.g., the financial services industry).
---------------------------------------------------------------------------

    \5\ "Home Computers and Internet Use in the United States:
August 2000," U.S. Census Bureau Current Population Reports
(September 2001).

    \6\ Contingent Work Supplement to the February, 1999 Current
Population Survey, U.S. Census Bureau.
---------------------------------------------------------------------------

    The Department then looked at each disclosure required under Title
I of ERISA to evaluate the extent to which plan administrators might
consider electronic distribution appropriate. For purposes of the
required notices of blackout periods, it was assumed that in most cases
where plan administrators and participants had consistent access to
computers, these notices would be distributed electronically. This is
because it is believed that plan administrators will consider the
information time sensitive, because electronic distribution is cost
effective, and because the investment companies that provide
administrative services for many individual account plans commonly
communicate with customers in an electronic format.

    While the description of the use of electronic technologies in the
preamble to the interim final rule may have been read to suggest that
most or all blackout notices were expected to be delivered
electronically, the delivery of the majority of notices is in fact
still estimated to occur by first class mail. About 38 percent of such
notices are expected to be delivered electronically. While the
Department agrees with the commenter that many plans will derive no
benefit from electronic distribution, it has carefully considered its
approach to estimating distribution savings for plans situated to make
use of electronic technologies, and continues to believe that the
approach supports reasonable estimates.

    Accordingly, it has not modified its previous assumptions
concerning the likely methods of delivery for notices of blackout
periods.

Burden Estimates

    In order to estimate the potential costs of the notice provisions
of section 101(i) of ERISA and this final rule, the Department
tabulated the number of participant-directed individual account plans
and the number of participants, inactive participants and beneficiaries
who have not taken distributions, in those plans using the plans' Form
5500 filings for 1998, the most recent year currently available. The
Department then projected these counts forward, producing estimates of
295,000 small and 45,000 large participant-directed individual account
plans in 2002 (totaling 341,000). Participant counts were also
projected, resulting in estimates of 7.4 million small plan
participants and 40.4 large plan participants (totaling 47.8 million)
in 2002 that would potentially be affected by blackout notices. A more
detailed explanation of the methods and data used in these projections,
as well as assumptions underlying the proportion of these plans and
participants expected to be affected each year may be found in the
preamble to the interim final rules.

    Based on available data, the Department assumes that 25% percent of
potentially affected plans will impose a blackout period in any given
year. The resulting numbers of plans and participants assumed to be
affected by the notice provisions annually are 85,150 and about 12
million, respectively.

    The availability of a model notice as provided in paragraph (e)
will lessen the time otherwise required to draft a required notice. In
developing burden estimates, the Department has allowed one-half hour
for drafting of the elements of the form by the plan administrator, and
one hour for legal review of the drafted notice, the latter expense to
be incurred as a payment of fees for outside services. This accounts
for the burden of preparing the notice, which is estimated at 42,600
hours, and $6.4 million. No additional preparation time is accounted
for to draft the notice required to be provided to an issuer of
employer securities under paragraph (c), because this final rule
requires the content and timing of that notice to be the same as the
notice prepared for the purpose of paragraph (b)(1). The burden of this
notice would be driven by the number of plans rather than participants,
and the notice would be required in far more limited circumstances than
the notice to participants under paragraph (b)(1), as it pertains only
to the issuer's securities affected by the blackout period in the plan.
In addition, based on the addition of paragraph (c)(3), when the issuer
designates the plan administrator as the party to receive of blackout
periods involving securities of the issuer, the plan administrator is
not required to provide this notice separately to itself. This
modification should serve to reduce the number of these notices because
the issuer and plan administrator are in some instances the same
entity; however, the magnitude of the reduction cannot be estimated.
Because only a small segment of participant directed individual account
plans holds employer securities that would be subject to the
requirements of paragraph (c), the cost of delivering such notices is
estimated to be negligible.

    The estimated burden for distribution of blackout notices takes
several factors into account, including an assumed number of
participants affected annually, the number of the notices that will be
distributed electronically, and on paper, and the differential costs of
electronic and paper distribution methods. The estimates of the rate of
use of electronic distribution methods are consistent with those used
in determining the savings associated with the Department's Final Rules
Relating to Use of Electronic Communication and Recordkeeping
Technologies by Employee Pension and Welfare Benefit Plans (67 FR
17264, April 9, 2002). Those participants not calculated to receive
notice electronically are

[[Page 3726]]

assumed to receive the notice on paper. Paper distribution is estimated
to require one minute per notice for copying and mailing, plus $0.40
for paper and postage. No time or direct cost is attributed to
electronic distribution methods other than the time required to prepare
the notice, because it is assumed that notices are drafted in
electronic form, plan administrators use existing infrastructure to
communicate electronically, and the cost of electronic transmission is
negligible. Paper notice distribution is estimated to require 123,500
hours, and cost about $3 million annually.

    The Department considers that this distribution burden estimate is
conservatively high due to the fact that many plans already provide
advance notices in the event of the imposition of a blackout period,
that most blackout periods arise from changes in investment providers
or recordkeepers, and that this advance notice either is or will be
included with other informational materials that would ordinarily be
supplied to participants or beneficiaries to implement that change.
Commenters were generally in agreement with these assumptions.

    No additional burden is included for the requirements for written
documentation that is to be dated and signed under paragraphs
(b)(2)(ii)(A) and (B) and (b)(2)(iv). It is assumed that written
documentation is normally maintained in the circumstances described,
and that the burden of adding a signature or providing a limited number
of copies upon request would be negligible.

    Further, no additional burden is estimated for subsequent notices
required due to changes described in paragraph (b)(4). The Department
has no basis for an estimate of the frequency of changes in the length
of blackout periods. Further, the Department believes that, although a
cost is incurred to do so, plan administrators typically inform
participants of changes in the duration of a blackout period as part of
their reasonable and customary business practices. It is acknowledged
that the content and timing might be modified based on the provisions
of the SOA and this final rule, however. As noted earlier, the
modification of the interim final rule provision describing the nature
of the information to be included on blackout period beginning and
ending dates should serve to minimize the number of subsequent notices
and their attendant costs by clarifying for plan administrators the
extent to which their usual practices conform to the provisions of the
final rule.

    The current estimates of annual respondents, responses, and hour
and cost burdens are shown below.

    Type of Review: Extension of a currently approved collection.

    Agency: Department of Labor, Pension and Welfare Benefits
Administration.

    Title: Notice of Blackout Period under ERISA.

    OMB Number: 1210-0122.

    Affected Public: Individuals or households; Business or other for-
profit; Not-for-profit institutions.

    Respondents: 85,150.

    Frequency of Response: On occasion.

    Responses: 11,956,000.

    Estimated Total Burden Hours: 166,129.

    Total Annual Cost (Operating and Maintenance): $ 9,351,400.

    OMB will consider comments submitted in response to this request in
its review of the request for an extension of the emergency approval of
the ICR; these comments will also become a matter of public record.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA),
imposes certain requirements with respect to federal rules that are
subject to the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely
to have a significant economic impact on a substantial number of small
entities. For purposes of its analyses under the RFA, PWBA continues to
consider a small entity to be an employee benefit plan with fewer than
100 participants. The basis of this definition is found in section
104(a)(2) of ERISA, which permits the Secretary of Labor to prescribe
simplified annual reporting for pension plans that cover fewer than 100
participants. Because this guidance is issued as a final rule pursuant
to the authority and deadlines prescribed in section 306(b)(2) of the
SOA, RFA does not apply, and regulatory flexibility analysis is not
required.

    The terms of the statute pertaining to the required notices to plan
participants and beneficiaries in the event of a blackout do not vary
relative to plan size. This final rule addresses the statutory
provisions, which are self-executing and do not afford the Department
with substantial discretion to exercise regulatory flexibility with
respect to small plans. While a cost is expected to be associated
primarily with the statutory provisions, the Department believes that
the final rule imposes no additional cost on small plans. The
Department nevertheless requested comments concerning any special
issues facing small plans with respect to blackout notices, and any
alternatives consistent with the objectives of the statute that may
serve to facilitate compliance. No comments were received in response.

    As to the potential impact of the final rule on small plans, the
Department notes that available data suggest that about 341,000 plans,
or 47 % of all plans are potentially impacted by the enactment of a
blackout notice requirement, in that they are individual account plans
that permit any form of individual investment direction.

    The statutory blackout notice requirement will potentially affect a
significant number of small plans. About 87% of the potentially
affected plans are small. However, although most affected plans are
small, the participants in those plans represent only about 16% of the
47.8 million potentially affected participants. Based on the assumption
that plans will impose a blackout period once every four years on
average, about 73,800 small plans and 11,400 large plans will prepare
and distribute notices annually. The small affected plans represent
about 10% of all pension plans, while the large affected plans
represent about 2% of all plans. Affected participants (1.9 million in
small plans, and 10.1 million in large plans) represent approximately
2% and 9% of all plan participants, respectively.

    The substance of the required notice is likely to be prepared once
per plan for each applicable blackout period and distributed to the
multiple affected participants. The fixed cost of preparing the notice
is estimated at approximately $100 for both large and small plans. The
total cost to affected small plans for both preparation and
distribution is expected to be an average of about $110 per year. The
comparable annual average cost to large plans of about $510 is
substantially greater due to the greater numbers of participants in
these plans, and the costs attendant to distribution of the notices.

Congressional Review Act

    The rules being issued here are subject to the Congressional Review
Act provisions of the Small Business Regulatory Enforcement Fairness
Act of 1996 (5 U.S.C. 801 et seq.) and have been transmitted to
Congress and the Comptroller General for review. The rule is not a
"major rule" as that term is defined in 5 U.S.C. 804, because it is
not likely to result in (1) an annual effect on the economy of $100
million or more; (2) a major increase in costs or prices for consumers,
individual industries, or federal, State, or local

[[Page 3727]]

government agencies, or geographic regions; or (3) significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and export markets.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), as well as Executive Order 12875, this final rule does not
include any Federal mandate that may result in expenditures by State,
local, or tribal governments, and does not impose an annual burden
exceeding $100 million on the private sector.

Federalism Statement

    Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism and requires the adherence to specific
criteria by federal agencies in the process of their formulation and
implementation of policies that have substantial direct effects on the
States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. This final rule does not have federalism
implications because it has no substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Section 514 of ERISA provides, with certain
exceptions specifically enumerated, that the provisions of Titles I and
IV of ERISA supersede any and all laws of the States as they relate to
any employee benefit plan covered under ERISA. The requirements
implemented in this final rule do not alter the fundamental reporting
and disclosure requirements of the statute with respect to employee
benefit plans, and as such have no implications for the States or the
relationship or distribution of power between the national government
and the States.

List of Subjects in 29 CFR Part 2520

    Employee benefit plans, Employee Retirement Income Security Act,
Pensions, and Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, amend part 2520 of Title
29 of the Code of Federal Regulations as follows:

PART 2520--RULES AND REGULATIONS FOR REPORTING AND DISCLOSURE

    1.The authority citation for part 2520 continues to read as
follows:

    Authority: 29 U.S.C. 1021-1025, 1027, 1029-31, 1059, 1134 and
1135; Secretary of Labor's Order No. 1-87.

    Sections 2520.102-3, 2520.104b-1 and 2520.104b-3 also issued under
29 U.S.C. 1003, 1171-73, 1185 and 1191-94; and under sec. 101(g)(4),
Pub. L. 104-191, 110 Stat. 1936.

    Sections 2520.104b-1 and 2520.107 also issued under sec. 1510, Pub.
L. 105-34, 111 Stat. 788.

    Section 2520.101-3 also issued under sec. 306(b)(2), Pub. L. 107-
204, 116 Stat. 745.

    2. Revise Sec. 2520.101-3 to read as follows:


Sec. 2520.101-3  Notice of blackout periods under individual account
plans.

    (a) In general. In accordance with section 101(i) of the Act, 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") and to issuers of
employer securities subject to such blackout period in accordance with
this section.

    (b) Notice to participants and beneficiaries--(1) Content. The
notice required by paragraph (a) of this section shall be written in a
manner calculated to be understood by the average plan participant and
shall include--

    (i) The reasons for the blackout period;

    (ii) A description of the rights otherwise available to
participants and beneficiaries under the plan that will be temporarily
suspended, limited or restricted by the blackout period (e.g., right to
direct or diversify assets in individual accounts, right to obtain
loans from the plan, right to obtain distributions from the plan),
including identification of any investments subject to the blackout
period;

    (iii) The length of the blackout period by reference to:

    (A) The expected beginning date and ending date of the blackout
period; or

    (B) The calendar week during which the blackout period is expected
to begin and end, provided that during such weeks information as to
whether the blackout period has begun or ended is readily available,
without charge, to affected participants and beneficiaries, such as via
a toll-free number or access to a specific web site, and the notice
describes how to access the information;

    (iv) In the case of investments affected, a statement that the
participant or beneficiary should evaluate the appropriateness of their
current investment decisions in light of their inability to direct or
diversify assets in their accounts during the blackout period (a notice
that includes the advisory statement contained in paragraph 4. of the
model notice in paragraph (e)(2) of this section will satisfy this
requirement);

    (v) In any case in which the notice required by paragraph (a) of
this section is not furnished at least 30 days in advance of the last
date on which affected participants and beneficiaries could exercise
affected rights immediately before the commencement of the blackout
period, except for a notice furnished pursuant to paragraph
(b)(2)(ii)(C) of this section:

    (A) A statement that Federal law generally requires that notice be
furnished to affected participants and beneficiaries at least 30 days
in advance of the last date on which participants and beneficiaries
could exercise the affected rights immediately before the commencement
of a blackout period (a notice that includes the statement contained in
paragraph 5. of the model notice in paragraph (e)(2) of this section
will satisfy this requirement), and

    (B) An explanation of the reasons why at least 30 days advance
notice could not be furnished; and

    (vi) The name, address and telephone number of the plan
administrator or other contact responsible for answering questions
about the blackout period.

    (2) Timing. (i) The notice described in paragraph (a) of this
section shall be furnished to all affected participants and
beneficiaries at least 30 days, but not more than 60 days, in advance
of the last date on which such participants and beneficiaries could
exercise the affected rights immediately before the commencement of any
blackout period.

    (ii) The requirement to give at least 30 days advance notice
contained in paragraph (b)(2)(i) of this section shall not apply in any
case in which--

    (A) A deferral of the blackout period in order to comply with
paragraph (b)(2)(i) of this section would result in a violation of the
requirements of section 404(a)(1)(A) or (B) of the Act, and a fiduciary
of the plan reasonably so determines in writing;

    (B) The inability to provide the advance notice of a blackout
period is due to events that were unforeseeable or

[[Page 3728]]

circumstances beyond the reasonable control of the plan administrator,
and a fiduciary of the plan reasonably so determines in writing; or

    (C) The blackout period applies only to one or more participants or
beneficiaries solely in connection with their becoming, or ceasing to
be, participants or beneficiaries of the plan as a result of a merger,
acquisition, divestiture, or similar transaction involving the plan or
plan sponsor.

    (iii) In any case in which paragraph (b)(2)(ii) of this section
applies, the administrator shall furnish the notice described in
paragraph (a) of this section to all affected participants and
beneficiaries as soon as reasonably possible under the circumstances,
unless such notice in advance of the termination of the blackout period
is impracticable.

    (iv) Determinations under paragraph (b)(2)(ii)(A) and (B) of this
section must be dated and signed by the fiduciary.

    (3) Form and manner of furnishing notice. The notice required by
paragraph (a) of this section shall be in writing and furnished to
affected participants and beneficiaries in any manner consistent with
the requirements of Sec. 2520.104b-1 of this chapter, including
paragraph (c) of that section relating to the use of electronic media.

    (4) Changes in length of blackout period. If, following the
furnishing of a notice pursuant to this section, there is a change in
the length of the blackout period (specified in such notice pursuant to
paragraph (b)(1)(iii) of this section), the administrator shall furnish
all affected participants and beneficiaries an updated notice
explaining the reasons for the change and identifying all material
changes in the information contained in the prior notice. Such notice
shall be furnished to all affected participants and beneficiaries as
soon as reasonably possible, unless such notice in advance of the
termination of the blackout period is impracticable.

    (c) Notice to issuer of employer securities. (1) The notice
required by paragraph (a) of this section shall be furnished to the
issuer of any employer securities held by the plan and subject to the
blackout period. Such notice shall contain the information described in
paragraph (b)(1)(i), (ii), (iii) and (vi) of this section and shall be
furnished in accordance with the time frames prescribed in paragraph
(b)(2) of this section. In the event of a change in the length of the
blackout period specified in such notice, the plan administrator shall
furnish an updated notice to the issuer in accordance with the
requirements of paragraph (b)(4) of this section.

    (2) For purposes of this section, notice to the agent for service
of legal process for the issuer shall constitute notice to the issuer,
unless the issuer has provided the plan administrator with the name of
another person for service of notice, in which case the plan
administrator shall furnish notice to such person. Such notice shall be
in writing, except that the notice may be in electronic or other form
to the extent the person to whom notice must be furnished consents to
receive the notice in such form.

    (3) If the issuer designates the plan administrator as the person
for service of notice pursuant to paragraph (c)(2) of this section, the
issuer shall be deemed to have been furnished notice on the same date
as notice is furnished to affected participants and beneficiaries
pursuant to paragraph (b) of this section.

    (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.

    (ii) Exclusions. The term "blackout period" does not include a
suspension, limitation, or restriction--

    (A) Which occurs by reason of the application of the securities
laws (as defined in section 3(a)(47) of the Securities Exchange Act of
1934);

    (B) Which is a regularly scheduled suspension, limitation, or
restriction under the plan (or change thereto), provided that such
suspension, limitation or restriction (or change) has been disclosed to
affected plan participants and beneficiaries through the summary plan
description, a summary of material modifications, materials describing
specific investment alternatives under the plan and limits thereon or
any changes thereto, participation or enrollment forms, or any other
documents and instruments pursuant to which the plan is established or
operated that have been furnished to such participants and
beneficiaries;

    (C) Which occurs by reason of a qualified domestic relations order
or by reason of a pending determination (by the plan administrator, by
a court of competent jurisdiction or otherwise) whether a domestic
relations order filed (or reasonably anticipated to be filed) with the
plan is a qualified order within the meaning of section 206(d)(3)(B)(i)
of the Act; or

    (D) Which occurs by reason of an act or a failure to act on the
part of an individual participant or by reason of an action or claim by
a party unrelated to the plan involving the account of an individual
participant.

    (2) Individual account plan. The term "individual account plan"
shall have the meaning provided such term in section 3(34) of the Act,
except that such term shall not include a "one-participant retirement
plan" within the meaning of paragraph (d)(3) of this section.

    (3) One-participant retirement plan. The term "one-participant
retirement plan" means a one-participant retirement plan as defined in
section 101(i)(8)(B) of the Act.

    (4) Issuer. The term "issuer" means an issuer as defined in
section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c), the
securities of which are registered under section 12 of the Securities
Exchange Act of 1934, or that is required to file reports under section
15(d) of the Securities Exchange Act of 1934, or files or has filed a
registration statement that has not yet become effective under the
Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not
withdrawn.

    (5) Calendar week. For purposes of paragraph (b)(1)(iii)(B), the
term "calendar week" means a seven day period beginning on Sunday and
ending on Saturday.

    (e) Model notice--(1) General. The model notice set forth in
paragraph (e)(2) of this section is intended to assist plan
administrators in discharging their notice obligations under this
section. Use of the model notice is not mandatory. However, a notice
that uses the statements provided in paragraphs 4. and 5.(A) of the
model notice will be deemed to satisfy the notice content requirements
of paragraph (b)(1)(iv) and (b)(1)(v)(A), respectively, of this
section. With regard to all other information required by paragraph
(b)(1) of this section, compliance with the notice content requirements
will depend on the facts and circumstances pertaining to the particular
blackout period and plan.

    (2) Form and content of model notice.

[[Page 3729]]


Important Notice Concerning Your Rights

Under The [Enter Name of Individual Account Plan]


    [Enter date of notice]

    1. This notice is to inform you that the [enter name of plan]
will be [enter reasons for blackout period, as appropriate: changing
investment options, changing recordkeepers, etc.].

    2. As a result of these changes, you temporarily will be unable
to [enter as appropriate: direct or diversify investments in your
individual accounts (if only specific investments are subject to the
blackout, those investments should be specifically identified),
obtain a loan from the plan, or obtain a distribution from the
plan]. This period, during which you will be unable to exercise
these rights otherwise available under the plan, is called a
"blackout period." Whether or not you are planning retirement in
the near future, we encourage you to carefully consider how this
blackout period may affect your retirement planning, as well as your
overall financial plan.

    3. The blackout period for the plan [enter the following as
appropriate: is expected to begin on [enter date] and end [enter
date]/is expected to begin during the week of [enter date] and end
during the week of [enter date]. During these weeks, you can
determine whether the blackout period has started or ended by [enter
instructions for use toll-free number or accessing web site].

    4. [In the case of investments affected by the blackout period,
add the following: During blackout period you will be unable to
direct or diversify the assets held in your plan account. For this
reason, it is very important that you review and consider the
appropriateness of your current investments in light of your
inability to direct or diversify those investments during the
blackout period. For your long-term retirement security, you should
give careful consideration to the importance of a well-balanced and
diversified investment portfolio, taking into account all your
assets, income and investments.] [If the plan permits investments in
individual securities, add the following: You should be aware that
there is a risk to holding substantial portions of your assets in
the securities of any one company, as individual securities tend to
have wider price swings, up and down, in short periods of time, than
investments in diversified funds. Stocks that have wide price swings
might have a large loss during the blackout period, and you would
not be able to direct the sale of such stocks from your account
during the blackout period.]

    5. [If timely notice cannot be provided (see paragraph (b)(1)(v)
of this section) enter: (A) Federal law generally requires that you
be furnished notice of a blackout period at least 30 days in advance
of the last date on which you could exercise your affected rights
immediately before the commencement of any blackout period in order
to provide you with sufficient time to consider the effect of the
blackout period on your retirement and financial plans. (B) [Enter
explanation of reasons for inability to furnish 30 days advance
notice.]]

    6. If you have any questions concerning this notice, you should
contact [enter name, address and telephone number of the plan
administrator or other contact responsible for answering questions
about the blackout period].

    (f) Effective date. This section shall be effective and shall apply
to any blackout period commencing on or after January 26, 2003. For the
period January 26, 2003 to February 25, 2003, plan administrators shall
furnish notice as soon as reasonably possible.

Dated: January 16, 2003.


Ann L. Combs,
Assistant Secretary,
Pension and Welfare Benefits Administration,
U.S. Department of Labor.
[FR Doc. 03-1430 Filed 1-23-03; 8:45 am]
BILLING CODE 4510-29-P

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