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EBSA (Formerly PWBA) News Release:
[10/18/2002] Contact Name: Sue Hensley or Kathleen Harrington Phone
Number: (202) 693-4676
EMBARGOED UNTIL: 10:00 A.M. EDT, OCTOBER 19, 2002
(SATURDAY)
Labor Department Issues Rules On Disclosure Of Pension
Plan Blackout Periods
WASHINGTONThe U.S. Labor Departments Pension and
Welfare Benefits Administration will publish interim final rules on Monday
(Oct. 21, 2002) implementing a new federal law requiring 401(k)-type plans to
give participants 30-day advance notice of blackout periods
affecting their rights to direct investments, take loans or obtain
distributions. The interim final rules contain model notice language to assist
plan sponsors in carrying out this new obligation.
Blackout periods typically occur when plans change record keepers or
investment options, or add participants due to a corporate merger or
acquisition.
President Bushs retirement security proposals to protect
American workers called for advance notice of blackout periods and restrictions
on corporate insiders from trading their own stock when workers are frozen.
These rules are the first regulatory action to implement components of the
President's retirement security plan, said Secretary of Labor Elaine L.
Chao. Workers will now be empowered to take control of their retirement
assets and make informed decisions to manage their retirement accounts in
advance of a blackout.
Congress needs to take the next steps to pass legislation to give
workers the right to diversify their accounts and better information including
access to professional investment advice, Chao said.
On July 30 President Bush signed the Sarbanes-Oxley Act of 2002 giving
the Labor Department authority to promulgate interim final rules and a model
notice implementing the blackout notice provisions. The Act requires that
participants and beneficiaries be given a 30-day advance notice of a blackout
period. When a blackout period affects a plan that includes employer stock as
an investment option, the plan must also notify the corporate issuer of the
employer stock so that corporate insiders are aware that they may not trade
employer securities or exercise options during the blackout. Under the interim
rules, administrators of plans with individual accounts must provide blackout
notices that contain, among other things:
- The reasons for the blackout period,
- A description of the rights that will be suspended during the
blackout period,
- The start and end dates of the blackout period,
- and A statement advising participants to evaluate their current
investments based on their inability to direct or diversify assets during the
blackout period.
A second set of rules issued by the Department provides for civil
penalties of up to $100 per day per participant for plan administrators who
fail or refuse to comply with the notice requirement. The interim final rules,
to be published in the Oct. 21 Federal
Register, are effective Jan. 26, 2003.
The rules may be viewed at:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-26522-filed
and
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-26523-filed.
Attached: Fact SheetPresident Takes Action to Protect Pensions
and Retirement Security for All Americans
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President Takes Action to Protect Pensions and
Retirement Security for All Americans
President Bush believes that economic freedom is essential to individual
success and prosperity. The Presidents economic agenda invests in
individuals by creating jobs, expanding opportunities to save and invest,
providing a good education, and helping each American own part of the American
dream.
- An important component of the Presidents economic security
agenda is providing American workers and retirees new tools to protect their
pensions, investments, and retirement security.
- In his radio address, the President will announce the implementation
of rules that require workers to receive a 30-day notification before any
blackout restrictions are placed on their 401(k) plans.
- On October 21, 2002, the Department of Labor will issue regulations
implementing the new notice provisions, providing important protections to
workers and retirees with investments in 401(k) plans. The regulations provide
both interim-final rules and a model notice to assist plans in carrying out
their responsibilities. Under the new rules:
- Workers will receive notice 30 days before any restrictions are
placed on their ability to direct investments, take loans, or obtain
distributions from their 401(k) plans.
- Companies with employer stock in their 401(k) plan will receive the
same notice so corporate insiders will know they cannot sell stock in the
company or exercise stock options when the workers in the 401(k) plan are
restricted from doing so.
- The notice to employees must include the reasons for the blackout
period; its beginning and ending date; and, if the ability to direct
investments is suspended, a statement that participants should evaluate their
current investments in light of their inability to direct or diversify assets
during the blackout period.
- Failure or refusal to provide the required notice will result in a
civil penalty.
- The rule will be effective on the earliest possible date under the
statute, January 26, 2003 (180 days after enactment of the Sarbanes-Oxley
legislation).
The Securities and Exchange Commission is also working on a new rule
scheduled to take effect early next year that will bar corporate executives
from trading their stock when their rank and file workers are prevented from
selling theirs.
Unfinished Business
The President has proposed other important, commonsense proposals to
help protect the retirement savings of American workers:
- Allowing workers to diversify their investments in employer stock
after three years.
- Providing workers quarterly benefit statements that explain the value
of diversified investments.
- Giving workers better access to much-needed investment advice from
professional advisers acting in the workers' best interest.
These remaining provisions passed the House of Representatives on April
11, 2002. Unfortunately, the Senate has failed to act on these important
initiatives.
To learn more about the Presidents comprehensive economic
security and corporate accountability agenda please visit
www.whitehouse.gov.
# # #
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