Workers to get 30-day notice of 401(k) lockout periods

<br>WASHINGTON (AP) _ Starting next year, workers participating in employer-sponsored 401(k) plans must receive 30 days notice before they are blocked from accessing their retirement savings accounts while

Monday, October 21st 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ Starting next year, workers participating in employer-sponsored 401(k) plans must receive 30 days notice before they are blocked from accessing their retirement savings accounts while administrative changes are being made.

That's according to a Labor Department regulation issued Monday, which takes effect Jan. 26. A corporate accountability law, inspired by last year's Enron scandal and passed by Congress this summer, required the department to issue the rule.

Congress has failed to pass legislation aimed strictly at 401(k) plans to tighten protections for workers. The 30-day notice of blackout periods was about all Republicans and Democrats could agree on, so it was included in the corporate accountability bill that passed.

The Bush administration publicized the regulations in President Bush's radio address Saturday. The White House has its eye on the Nov. 5 elections that will determine control of Congress. Bush hopes to deflect Democrats' claims that the economy has worsened during his presidency, and he has done little to help.

At least one proponent of stronger consumer protections criticized the White House and Congress, saying much more needs to be done.

The White House ``is trying to make this into a big deal. This is not a big deal. In fact, this is a red herring,'' said Karen Friedman, policy director for the Pension Rights Center. ``The so-called blackout period is a very small part of the problems that were created in the fallout of Enron and WorldCom.''

Under the regulation, 401(k) plan administrators that fail to provide the notice can be fined up to $100 per day per plan participant. But companies are not required to notify the Labor Department of a blackout period.

Notices must contain the reasons for the blackout period, a description of participants' rights that will be suspended during that time, the start and end dates and a statement advising participants to evaluate current investments based on their inability to make changes during the blackout period.

Those requirements ``will create incentives for companies to keep blackouts as brief as possible,'' said Ann Combs, assistant labor secretary for pension and welfare benefits.

Corporate executives also will be barred from selling company stock or exercising options during blackout periods.

Bush signed the corporate accountability bill in July at the height of public outrage over a string of corporate scandals that rocked the country and Wall Street. The law in part responded to the predicament of Enron Corp. workers, many of whom lost their retirement savings when the company's stock value plummeted last year.

The decline came as thousands of workers who were heavily invested in Enron stock were barred for weeks from accessing their accounts as the retirement plan changed administrators. The 20,795 participants had about 63 percent of their assets invested in company stock.

Under intense pressure from business groups, Congress has done nothing to limit how much company stock that workers can invest in as part of their 401(k) plans. Labor law limits to 10 percent the assets of a traditional pension plan that may be held in employer stock or property. Years ago, Congress exempted 401(k)s from that provision, hoping to encourage employers to offer the plans. Employers get tax breaks for matching contributions.

Some Senate Democrats favored imposing limits that would force plan diversification, but an agreement was not reached and the Senate failed to act on any 401(k) legislation.

The Republican-controlled House passed a bill that includes a provision to allow workers to receive investment advice from the same companies that manage their 401(k) retirement accounts. Republicans say that would help workers diversify their accounts, but Democrats claim the advice would be tainted by financial conflicts of interest.