As an employer, you may find that you need to make changes to your company’s benefits package occasionally. This includes changing retirement plan providers, adjusting match programs, adding investment options, and more. In some instances, you may be part of a merger with another company, requiring benefits to be reviewed and adjusted overall. In many cases, this will require a 401(k) blackout, which is a temporary pause that restricts plan access for participants, including, making transfers, changing contributions, taking out loans, and other 401(k)-related activities. While the account is not formally frozen, money that is invested will continue to move with the market during the blackout.
Participants can still make contributions and existing loan repayments during a blackout period. Still, it’s important (and federally required) to communicate the period, changes, and expectations to employees in advance to avoid issues and setbacks.
How Long Do Blackout Periods Last?
According to SmartAsset, blackout periods can last anywhere between three to 30 days, to a few months under extenuating circumstances. Because of the sensitivity of time restraints, employers are required by federal law to provide notice to all employees participating in the company’s 401(k) plan.
Notifying Participants About Blackout Periods
When anticipating a blackout period, employers need to include specific instructions and follow crucial steps. It’s important that every plan participant, regardless of employment status – such as past, current, or inactive – receive the notice at least 30 days in advance of the blackout, but no more than 60 days.
While the plan provider – like Slavic401k, Fidelity, or Vanguard, will typically provide language for a blackout, as an employer, you should ensure the language includes the following:
- Definition of a blackout
- Reason for the blackout
- Expected timeline
- Restrictions, rules, and regulations related to the blackout
- Guidance for making changes prior to the blackout
- Plan administrator information
When going through a blackout period that will last longer than a few days, remember to notify your employees and participants repeatedly. Over-educate, over-communicate, and provide an open line of communication to answer questions and concerns prior to making changes. Combined, both your company and employees will experience a more successful blackout.
To read more retirement education on how to make, save, and spend money for the future, visit the Slavic401k blog.