[Federal Register Volume 67, Number 203 (Monday, October 21, 2002)]
[Rules and Regulations]
[Pages 64766-64774]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26522]



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Part V





Department of Labor





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Pension and Welfare Benefits Adminstration



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29 CFR Parts 2520, 2560, and 2570



Interim Final Rule Relating to Notice of Blackout Periods to 
Participants and Beneficiaries and Civil Penalties Under ERISA Section 
502(c)(7) and Conforming Technical Changes On Civil Penalties Under 
ERISA Sections 502(c)(2), 502(c)(5) and 502(c)(6); Interim Final Rules

  Federal Register / Vol. 67, No. 203 / Monday, October 21, 2002 / 
Rules and Regulations  

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Part 2520

RIN 1210-AA90


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

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Interim final rule with request for comments.

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SUMMARY: This document contains interim final rules 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 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. This 
interim final rule is published pursuant to section 306(b)(2) of the 
SOA in order to carry out the provisions of section 101(i) of ERISA, 
and to invite the public to submit comments on the interim regulation 
so as to obtain information as to what further guidance in this area 
would be helpful to plan administrators and their advisors in 
fulfilling their duties to provide notice of blackout periods.

DATES: Effective date: This interim final rule is effective January 26, 
2003 and shall apply to blackout periods commencing on or after that 
date. Comment date: Written comments on this interim final rule must be 
received by November 20, 2002.

ADDRESSES: Written comments on the interim final rule (preferably three 
copies) should be submitted to: Office of Regulations and 
Interpretations, Pension and Welfare Benefits Administration, Room N-
5669, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Washington, DC 20210. Attention: Blackout Notice Regulation. Written 
comments may also be sent by Internet to the following address: [email protected]">e-[email protected]. All written comments will be available for public 
inspection at the Public Disclosure Room, Pension and Welfare Benefits 
Administration, U.S. Department of Labor, Room N-1513, 200 Constitution 
Avenue, NW., Washington, DC, from 8 a.m. to 4:30 p.m. (Monday-Friday).

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, enacted 
on July 30, 2002, provides that the Secretary of Labor shall promulgate 
within 75 days of enactment interim final rules necessary to carry out 
the provisions of section 306(b) of the SOA and, accordingly, these 
interim final rules will become effective without advance notice and 
comment.
    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 interim 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. Interim final rules implementing this civil penalty also appear 
elsewhere in today's issue of the Federal Register.
    The issuance of these interim final rules will help serve to 
preserve and protect the retirement benefits of American workers and 
their families.

B. Overview of Interim Final Rules

    In general, the rules being adopted in this interim final rule 
track the provisions of ERISA section 101(i), as added by section 
306(b)(1) of the SOA. The following is a general overview of the 
interim final rule, to be codified at 29 CFR 2520.101-3.
    Paragraph (a) of Sec.  2520.101-3 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.
    Paragraph (b) of Sec.  2520.101-3 sets forth the 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) 
makes clear 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) makes clear that the notice 
must contain the expected beginning and ending date of the blackout 
period. In the Department's view, an indication of the expected length 
of the blackout period is intended both to enable participants and 
beneficiaries 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 under the plan. Accordingly, it is 
the view of the Department that the description of the length of the 
blackout period must include the expected ending date of the blackout 
period.
    Paragraph (b)(1)(iv) requires the inclusion of a statement advising 
participants and beneficiaries to review their current investments in 
light of their inability to direct or diversity 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.
    Section 101(i)(2)(A)(v) of the Act provides that notice shall 
contain ``such other matters as the Secretary may require by 
regulation.'' In this regard,

[[Page 64767]]

the Department has added, for purposes of this interim final rule, two 
informational items.
    First, given the importance of adequate advance notice of blackout 
periods to plan participants and beneficiaries, the Department believes 
that, in those situations where 30 days advance notice is not 
furnished, participants and beneficiaries should be furnished an 
explanation as to why the plan was unable to furnish at least 30 days 
advance notice. Paragraph (b)(1)(v) of the interim final rule, 
therefore, provides 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) will 
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) does 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).)
    Second, given the potential impact of a blackout period on a 
participant's or beneficiary's financial planning, it is likely that 
participants and beneficiaries will have questions about a blackout 
period. For this reason, the Department has 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) provides 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 specifically invites comments on what, if any, 
additional information should be required to be contained in the 
blackout notice furnished to participants, beneficiaries and issuers 
under this section.
    Paragraph (b)(2) describes the timing requirements applicable to 
furnishing the notice to affected participants and beneficiaries. 
Paragraph (b)(2)(i) provides 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. It 
is the view of the Department that Congress, in providing a 30-day 
advance notice requirement, intended to ensure that each participant 
and beneficiary affected by a blackout period had an adequate 
opportunity 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. In order to ensure 
that each affected participant and beneficiary is afforded an 
opportunity to assess the potential effects of a blackout, as 
contemplated by Congress, the interim rule requires that, except to the 
extent otherwise provided, the 30-day period must be counted back from 
the last date on which the participant or beneficiary had the right to 
take action under the terms of the plan in anticipation of the blackout 
period.
    For example, 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 
provides participants and beneficiaries the right to direct their 
investments on a monthly basis, notice would have to be provided at 
least 30 days prior to the month preceding the month in which a 
blackout period affecting such rights occurs. For example, under a plan 
permitting participants to direct their investments during the first 
fifteen days of each month, it is determined 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.
    The Department notes that all references in the regulation to 
``days'' are references to calendar days, not business days, unless 
specifically noted otherwise. For purposes of the interim final rule, 
the Department also established an outside maximum period of 60 days 
preceding the last day on which participants and beneficiaries could 
exercise the affected rights immediately before the commencement of a 
blackout period in order 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 notes that if a plan administrator wishes to provide a 
longer period for affected participants and beneficiaries to consider 
the effects of a blackout period on their individual accounts, there is 
nothing in the interim final rule that precludes an administrator from 
supplementing the requirements of the regulation, by furnishing earlier 
or more frequent notices than that required by the interim final rule, 
provided that at least one notice is provided to participants and 
beneficiaries that complies with the timing and content of the interim 
final rule. The Department specifically invites comments on the need 
for, and length of, such a limitation on advance notice of blackout 
periods.
    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(1)(A) and (B) of the Act. For example, the ABC company has 
announced that it is filing for bankruptcy. The ABC company's 401(k) 
plan has ABC common stock as one of its investment options. F, the 
401(k) plan administrator, determines that, given this event, it would 
not be prudent to continue to permit participants to direct investments 
into 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

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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 both of the foregoing circumstances, the plan administrator must 
make a written determination with respect to the circumstances 
precluding compliance with the 30-day advance notice requirement. The 
interim final rule, at paragraph (b)(2)(iv), requires that such 
determinations must be dated and signed by the plan administrator.
    Section 101(i)(3) generally 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. Paragraph (b)(2)(ii)(C) 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.
    Paragraph (b)(2)(iii) 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 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. The Department invites comments on, and 
examples of, circumstances under which the furnishing of notice in 
accordance with the regulation would be impracticable.
    Paragraph (b)(3) 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. For purposes of this 
interim final rule, 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. The 
Department specifically invites comments on the appropriateness of such 
furnishing rule.
    Paragraph (b)(4) describes the notice requirements applicable to 
changes in the beginning or ending date of the blackout period. The 
interim final rule provides that, under such circumstances, 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.
    Paragraph (c) of Sec.  2520.101-3 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. While the interim final rule does 
not require that all the information required to be included in the 
notice to participants and beneficiaries be included in the notice to 
the issuer, 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 under this rule.
    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.
    Paragraph (d) of Sec.  2520.101-3 sets forth, for purposes of the 
interim final rule, definitions of: (1) ``blackout period''; (2) 
``individual account plan''; and (3) ``one-participant retirement 
plan'', each of which is identical to the definitions in section 
101(i)(7), (8)(A) and 8(B) of the Act, respectively. Paragraph (d)(4) 
defines the term ``issuer'' for purposes of the 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),\1\ 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.
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    \1\ 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.
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    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, the interim 
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 
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

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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.
    Paragraph (f) of Sec.  2520.101-3 sets forth the effective date of 
the interim final rule. Pursuant to paragraph (f), the rule is 
effective 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.
    This interim final rule does not deal with the application of the 
fiduciary provisions as they relate to the timing and administration of 
a blackout period.

C. Request for Comments

    In addition to the specific requests for comments identified above, 
the Department encourages all interested persons to submit their 
comments, suggestions and views concerning the provisions of this 
interim final rule, including the model notice. In particular, the 
Department is interested in any area in which additional guidance would 
facilitate compliance with these important rules.
    Written comments on the this rule should be submitted to: Office of 
Regulations and Interpretations, Pension and Welfare Benefits 
Administration, Room N-5669, U.S. Department of Labor, 200 Constitution 
Avenue, NW., Washington, DC 20210. Attention: Blackout Notice 
Regulation. Written comments may also be sent by Internet to the 
following address: [email protected]">e-[email protected]. Written comments on this rule 
must be received no later than November 20, 2002. The comment period is 
being limited to 30 days to enable the Department to adopt changes to 
the interim final rule prior to the effective date of the SOA 
amendments.

D. Regulatory Impact Analysis

Summary

    The costs associated with this interim 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 by the 
statute and interim final rule cannot be quantified, but are expected 
to be substantial. This requirement 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 new and continued plan participation. This guidance 
will also assist plan administrators in their efforts to fulfill their 
obligations to participants and beneficiaries. Finally, the requirement 
for notice to issuers of employer securities affected by blackout 
periods will serve to some extent to equalize the rights of plan 
participants and beneficiaries and the officers and directors of the 
issuer with respect to those securities.

Benefits and Costs

    The SOA amendments to ERISA and this implementing guidance will 
have several important benefits. First, acknowledging that plan 
administrators impose blackout periods from time to time in the 
ordinary course of business, the SOA ensures the communication of 
critical information to affected participants and beneficiaries. The 
timing and content of the required notice will ensure that participants 
and beneficiaries are aware of significant events affecting their 
ability to make meaningful decisions concerning their retirement 
savings. While many plan administrators may currently provide 
disclosures similar to those required by the statute and interim final 
rule, this new requirement 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 investments 
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 under their current 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 prudently. Participants frequently 
express concern when significant changes are made to plan options, or 
when rights previously available are temporarily limited. Assuring 
knowledge of the timing and reasons for such changes should serve to 
promote confidence in the security of retirement savings and promote 
continued growth in participation in the retirement plans offered by 
plan sponsors.
    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 fulfilling their obligation to advise 
participants about important matters affecting their rights under the 
plan.
    The value of these many 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

[[Page 64770]]

outweigh the costs of the statute and the interim 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 statutory provisions, and 
would in fact be estimated to be greater in the absence of a model 
notice due to higher notice preparation 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 
of 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.

Request for Comments

    The Department is interested in receiving comments from the public 
concerning the assumptions used in developing these estimates. 
Additional information as to the likely frequency of blackout periods, 
and other circumstances that might give rise to blackout periods would 
be particularly useful for informing any future decisions about the 
timing or content of the blackout notices. Identification of sources of 
variability in the costs and benefits of providing notices and of 
potential differential impacts on small plans would also be useful.

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 
interim final rule is significant within the meaning of section 3(f)(4) 
of the Executive Order. OMB has, therefore, reviewed the interim final 
rule pursuant to the Executive Order.

Paperwork Reduction Act

    The Department of Labor has submitted the information collection 
request (ICR) included in this interim final rule (the Notice of 
Blackout Period under ERISA) to OMB for review and clearance in 
accordance with the emergency review procedures of the Paperwork 
Reduction Act of 1995 (PRA 95). Emergency clearance is likely to be 
necessary in order to allow time to consider public comments and obtain 
OMB approval for the ICR by the effective date of the notice 
requirement of the SOA (180 days after the date of enactment, or 
January 26, 2003). OMB approval has been requested by November 20, 
2002. 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 [email protected].
    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 November 20, 
2002 to ensure their consideration.
    The Department and OMB are particularly interested in comments 
that:
    [sbull] 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;
    [sbull] 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;
    [sbull] Enhance the quality, utility, and clarity of the 
information to be collected; and
    [sbull] 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.
    The information collection provisions of this interim 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 interim 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. This interim final rule provides implementing 
guidance on the SOA, which, as it pertains to individual account plans 
under ERISA, generally requires that plan administrators provide 
affected participants and beneficiaries of individual account plans 
with advance notice of the commencement of a blackout period. A 
blackout period is a period of at least 3 business days during which 
participants' and beneficiaries' otherwise available ability to direct 
the disposition of assets in their accounts is suspended or restricted. 
The SOA also requires that the plan administrator provide notice to 
issuers of employer securities that are subject to a blackout period 
applicable to a plan. This is a general description for purposes of PRA 
95; the provisions of the interim final rule should be relied upon for 
compliance with the SOA and this implementing guidance.
    In order to estimate the potential costs of the notice provisions 
of section 101(i) of ERISA and this interim 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 to produce estimates of 
participant-directed individual account plans and participants for 
2002. The projections were based on historical growth of all individual 
account plans because reliable counts of participant-directed plans are 
not available for years prior to 1997.
    The Department assumed linear growth in the number of plans equal 
to the rate observed for all small and large individual account plans 
between 1992 and 1998, producing estimates of 295,000 small and 45,000 
large

[[Page 64771]]

participant-directed individual account plans in 2002 (totaling 
341,000). To project the number of participants in these plans, the 
Department assumed linear growth in the ratio of participants to total 
private employment equal to the rate observed in that ratio between 
1992 and 1998. The projected ratios for small and large plans in 2002 
were applied to total private employment in July 2002 as estimated by 
the U.S. Bureau of Labor Statistics, producing estimates of 7.4 million 
small and 40.4 million large plan participants (totaling 47.8 million) 
in 2002 that would potentially be affected by a blackout period notice 
requirement.
    An assumption was then needed to account for the fact that not all 
potentially affected plans will impose blackout periods that would 
trigger the notice requirement, and not all of those imposing blackout 
periods would do so in any given year. The Department reviewed 
available literature in an effort to establish a reasonable estimate of 
the frequency of the imposition of blackout periods that would trigger 
notice requirements. One small survey of administrators of very large 
plans indicated that their largest plans had undergone a blackout 
period at a rate of once each 3 to 4 years. A different survey 
indicated a lower frequency of blackout periods, at a rate in the area 
of about 7% of plans per year. No comprehensive statistics on this 
frequency are available. However, the Department is aware that the 
imposition of blackout periods is not rare. For this purpose, the 
Department has assumed that potentially affected plans will impose 
blackout periods on average once each 4 years. Among these, some will 
not impose blackout periods, some will impose blackout periods that do 
not trigger the notice requirement (e.g., a temporary suspension for a 
period of 3 or less consecutive days), and some may have blackout 
periods more frequently.
    The Department believes that the assumption that 25% percent of 
potentially affected plans will impose a blackout period in any given 
year results in a reasonable estimate of the number of plans that will 
actually be affected. However, the Department requests comments and any 
additional information that would validate or otherwise inform this 
assumption. The resulting numbers of plans and participants assumed to 
be affected by the notice provisions annually are 85,150 and about 12 
million, respectively.
    It is assumed that 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 interim 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. Only a 
small segment of participant directed individual account plans hold 
employer securities that would be subject to the requirements of 
paragraph (c), on the order of a maximum of about 500 plans per year. 
The direct cost of delivering such notices would be negligible.
    The estimated burden for distribution of the 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. 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 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.
    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 plan 
administrators would typically inform participants of changes in the 
duration of a blackout period as part of their reasonable and customary 
business practices, although content and timing might be modified based 
on the provisions of the SOA and this interim final rule.
    The resulting estimates of annual respondents, responses, and hour 
and cost burden are shown below.
    Type of Review: New.
    Agency: Department of Labor, Pension and Welfare Benefits 
Administration.
    Title: Notice of Blackout Period under ERISA.
    OMB Number: 1210-NEW.
    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 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

[[Page 64772]]

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 an interim 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 interim 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 interim final rule imposes no additional cost on small plans. The 
Department nevertheless wishes to address in its final rulemaking 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.
    The Department is issuing and requesting comments on a model notice 
in connection with this interim final rule that is intended to assist 
with compliance and moderate the administrative burden associated with 
these required notices. 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. These affected plans represent about 
10% and 2% of all plans, respectively. 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.
    A required notice is likely to be prepared once 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 about 
$110 per year. The comparable annual 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.
    The Department invites interested persons to submit comments on the 
impact of this interim final rule on small entities, and on any 
alternative approaches that may serve to minimize impact on small plans 
while accomplishing the objectives of the statute.

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 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 interim 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 interim 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 interim 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 is revised 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.

[[Page 64773]]


    2. Add Sec.  2520.101-3 to subpart A 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 expected beginning date and ending date of the blackout 
period;
    (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 person 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 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 beginning or ending date of the blackout period (specified in such 
notice pursuant to paragraph (b)(1) of this section), the administrator 
shall furnish all affected participants and beneficiaries 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. 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 beginning or 
ending date 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 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.
    (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

[[Page 64774]]

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 change to the plan which provides for a regularly 
scheduled suspension, limitation, or restriction which is disclosed to 
all affected plan participants or beneficiaries through any summary of 
material modifications, any materials describing specific investment 
alternatives under the plan, or any changes thereto; or
    (C) Which applies only to one or more individuals, each of whom is 
the participant, an alternate payee (as defined in section 206(d)(3)(K) 
of the Act), or any other beneficiary pursuant to a qualified domestic 
relations order (as defined in section 206(d)(3)(B)(i) of the Act).
    (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 306(b)(1) of the Sarbanes-Oxley Act of 2002.
    (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.
    (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.

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 will begin on [enter date] 
and end [enter date].
    4. [In the case of investments affected by the blackout period, 
enter the following: During the 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. 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 person 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: October 11, 2002.
Ann L. Combs,
Assistant Secretary, Pension and Welfare Benefits Administration, U.S. 
Department of Labor.
[FR Doc. 02-26522 Filed 10-18-02; 8:45 am]
BILLING CODE 4510-29-P