More and more we see the DOL requesting that missing contributions and lost earnings be taken from the owner's or trustee's account. As a service provider, we are not sure if this is considered a withdrawal from the owner's/trustee's account and if a 1099R should be issued. We asked at a recent conference and the IRS seemed shocked to find out that this practice was happening and did not answer. Anybody have any thoughts?

What is a "trustee's account"?

On what basis is DOL (or anyone) trying to take from Peter to pay Paul?

PAX: You might want to read IRC Section 401(a)(13)©.

The service provider does require the trustee or owner approve the DOL's request to move money from their plan account balance, and also require spousal consent if needed. I also had not read 401(a)(13)©. This does make it sound more like an offset than a distribution so if the DOL is ordering it, it would not require a 1099R be issued. At least I think that is what I will go with until someone clarifies it further. Thanks.