<nobr>Nov 21, 2002</nobr>

ERIC Submits Comments to DOL on Blackout Period Notices

Flexible Start and End Date Notices, Web Site and “Toll-Free” Number Notification, Relaxed Civil Penalties Among Requested Changes

Washington, DC - The ERISA Industry Committee (ERIC) yesterday filed comments with the Department of Labor (DOL) on proposed regulations regarding written notices and civil penalties with respect to blackout periods in individual account plans, such as 401(k) or stock purchase plans. ERIC called on the Department to recognize that it is virtually impossible for companies -- particularly major employers -- to state in their blackout notices to employees a precise start and end date for the blackout period -- the time when all company employees are prohibited from buying or selling company securities.

Instead, ERIC urged DOL to allow plan administrators the option of notifying employees that a blackout period would end within seven days before or after the stated ending date, and would begin on a specified beginning date or seven days after that date, provided that employers furnish a universal delivery system in the form of a “toll-free” telephone number and/or web site to update plan participants and beneficiaries as to the actual beginning and ending dates.

“Requiring companies to disclose precise start and end dates far in advance of a blackout period is asking companies to perform the impossible,” said Mark Ugoretz, president of ERIC. “Start and end dates are uncertain as to when third party plan recordkeepers will actually begin or end their work. The proposed rule will force plan administrators to send out numerous corrective notices as the ending date draws near. This process will become consuming to participants and very costly and cumbersome for companies with large plans covering hundreds of thousands of people if they are forced to mail new notices.”

ERIC also requested that the DOL recognize that the proposed civil penalties should not be imposed on plan administrators for inadvertently failing to produce a timely blackout notice to a small percentage of those participants enrolled in the plan. Because major employers often cover hundreds of thousands participants in their plans, a small percentage of participants may fail to receive timely blackout period notices due to data collection errors, data processing errors, addressing errors or some other hitch in the administrative process.

Additional recommendations by ERIC in the comments include:

* A plan administrator should be permitted to send the blackout period notice up to 90 days (rather than up to 60 days) before the last date on which participants and beneficiaries can exercise their affected rights before the start of the blackout period.

* A plan administrator should not be required to send the blackout period notice to an eligible employee who does not actually participate in the plan and who therefore does not have an account balance under the plan, as long as the administrator provides a blackout period notice to any such employee who subsequently acquires an account balance under the plan coincident with the employee’s enrollment in the plan or as soon as practicable after he or she acquires an account balance under the plan (e.g., by reason of a rollover or a plan-to-plan transfer).

* The 30-day advance notice requirement should not apply where the blackout period applies to participants and beneficiaries who are affected by a plan merger or spin-off -- (a) even if participants or beneficiaries already participate in both plans or (b) even if the plan merger or spin-off was not the result of a corporate merger, acquisition, divestiture, or similar transaction.

Individual account plans commonly experience blackout periods due to events such as mergers, acquisitions, and divestitures, as well as changes in trustees, record keepers, and plan investment options.

Full text of the ERIC comments submitted to DOL can be found at:

http://eric.org/testimony/download/112002b.pdf (blackout notices) and

http://eric.org/testimony/download/112002.pdf (civil penalties)

The ERISA Industry Committee (ERIC) is a non-profit association committed to the advancement of employee retirement, health, and welfare benefit plans of America's largest employers and represents exclusively the employee benefits interests of major employers. ERIC's members provide comprehensive retirement, health care coverage and other economic security benefits directly to some 25 million active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

Media Contact: Doug Baj, Director of Communications, ERISA Industry Committee, (202)789-1400, dbaj@eric.org.

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