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Blackout Rule Hits the Books

The labor department issued interim rules mandating corporate plan administrators to give 30 days' notice to employees before the company stock bla...
CFO.com StaffOctober 23, 2002

The corporate playing field is being leveled-off again, this time by the U.S. Department of Labor’s Pension and Welfare Benefits Administration.

Yesterday the agency issued interim final rules requiring defined contribution pension plan administrators to provide participants 30-day advance notice of blackout periods that would affect participants’ rights to direct investments, take loans, or obtain distributions. The measure was passed under section 306(b) of the Sarbanes-Oxley Act.

Blackout periods typically occur when plans change record keepers or investment options, or add participants after mergers.

The new rules also restrict top brass from trading their own stock during these periods. Previously, top executives could buy or sell their positions while other workers were 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.”

The Sarbanes-Oxley Act of 2002, signed by President George W. Bush in July, gave the Labor Department authority to promulgate interim final rules and a model notice implementing the blackout notice provisions.

The rule mandates that when a blackout period affects a plan that includes employer stock as an investment option, the plan administrator must notify the corporate issuer of the stock so that company insiders are aware that they may not trade employer securities or exercise options during the blackout.

The new rules were issued in two parts: the first explains the advance notice requirements; the second establishes DOL’s procedures for assessing penalties for failure to comply.

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 that period; the start and end dates of the blackout ; and a statement advising participants to evaluate their current investments based on their inability to direct or diversify assets during the blackout period.

Civil penalties of up to $100 per day per participant can be levied for plan administrators who run afoul with the notice requirement.

The interim final rules will become effective Jan. 26, 2003.

Survey: Referral Bonuses Up

If you’ve heard it once, you’ve heard it a million times: it’s not what you know, it’s who you know. Indeed, the latest evidence that networking pays says that it pays in cold, hard cash.

According to a survey on referral bonuses by non-profit compensation-and-benefits research center WorldAtWork, 59 percent of the 458 responding companies have a referral bonus, and an additional 14 percent of those without are considering implementing one.

This year’s survey found that getting employees to recruit new talent is big business: The largest group of companies reported awarding between $1,000 and $4,999 to an employee for referring someone who is hired. Ten percent of companies pay a bonus of $5,000 or more to an employee who refers an executive to the company.

CFOs on the Move

Washington Mutual, Inc tapped General Electric executive Thomas Casey to be CFO. Casey joins the Seattle-based financial-services firm from GE, where he was VP and SVP and CFO of GE Insurance. He replaces William Longbrake, who will step down as finance chief to work full-time in his other job as vice chair of enterprise risk management … William H. Seippel was named VP and CFO of AirGate PCS Inc., a Sprint PCS network dealer. Seippel previously served as CFO and COO of Digital Commerce Corp.