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DOL Final Rule on Penalties for Not Providing Employer Stock Diversification Notice

    Client Alerts
  • August 17, 2007

On August 10, 2007, the DOL issued a final rule that impacts administrators of defined contribution retirement plans holding employer securities (other than certain ESOPs).  The Pension Protection Act of 2006 (“PPA”) requires a defined contribution plan holding employer securities to provide certain participants with the right to divest employer securities held in their plan accounts and reinvest the proceeds into certain diversified investments.  PPA also requires plans to provide a notice about this right.  There is a $100 per day penalty for failure to comply with this requirement.  Assuming no significant adverse comments are made to the DOL, the final rule will take effect October 9, 2007.


Compliance with the notice requirement is not generally difficult and is aided by guidance in IRS Notice 2006-107, which includes a model notice and can be found at the following link: