blackout period
A time period during which participants in a 401(k) plan are
not permitted to make changes in their investment allocations. The
typical blackout period lasts from 4 to 6 weeks and is imposed when
an employer-sponsor of a 401(k) plan changes from one plan administrator
to another. Claims against fiduciaries charged with overseeing such
plans most frequently arise when the stock market falls sharply
during blackout periods. Claims are more likely at such times, because
employees are unable to transfer monies out of stocks and thus reduce
losses. To reduce exposure to such claims, companies offering 401(k)
plans should provide notice of blackout periods well in advance
of the date on which they are scheduled to begin.
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PLI XII.C