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Understanding Blackout Periods

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What is a 401(k) blackout period?

A blackout period is a temporary timeframe, required by regulations,  when employees cannot make changes to their 401(k) accounts, such as adjusting contributions, transferring funds, or taking withdrawals. Blackout periods typically occur during plan transitions, certain investment changes, recordkeeper changes, or major administrative updates.

Why do blackout periods happen?

Blackout periods are necessary to ensure accurate processing of plan-related changes. Common reasons include:

  • Switching 401(k) providers (e.g., transitioning to Betterment).
  • Updating recordkeeping systems or plan structures.
  • Merging or restructuring plans due to company changes.

During this time, transactions are temporarily paused to prevent errors while assets are transferred or systems are updated.

How long does a 401(k) blackout period last?

Blackout periods vary but generally last 3 to 10 business days, depending on the complexity of the transition. Plan sponsors will receive advance notice of the blackout period timeframe.

How does a blackout period impact employees?

During a blackout period, employees cannot:

  • Make contribution changes.
  • Transfer or reallocate investments.
  • Take loans or withdrawals.

However, their existing investments continue to grow or fluctuate based on market performance.

What are plan sponsors required to do during a blackout period?

If a blackout period lasts more than three business days, plan sponsors must notify employees at least 30 days in advance. The notice will be provided by Betterment and will include:

  • The start and end dates of the blackout period.
  • A description of restricted activities (e.g., no fund transfers or withdrawals).
  • A plan contact for any questions.

How will I know if my plan has a blackout period?

If your plan requires a blackout period, Betterment will provide detailed instructions and timelines in advance. You’ll also receive employee communication templates to ensure proper notice and compliance.

What should plan sponsors communicate to employees?

Employees should be informed about:

  • The timing and duration of the blackout period.
  • What actions are restricted and what remains unaffected.
  • Who to contact for questions or concerns.

Clear communication helps employees understand the process and minimizes confusion.