Plan's very large, national investment service provider for 401(k) participant-directed plan refuses to make RMDs, even after being told it is a 401(a) plan qualification issue; the TPA and legal counsel have been unsuccesful in convincing them this is required. They will not distribute without a written participant election for distribution on file. TPA or Trustee instructions to distribute they will not accept. Anyone else run into this kind of situation or have a solution (other than participant-by-participant EPCRS corrections)?

I agree that the participant must sign the form and make a tax withholding election. I am on their side.

Are you talking about 2009 RMD's or ones that should have been paid for prior years?

What about 1.401(a)(9)-8, Q&A-4? If they are before NRD, then this provides that it must be made. If after, then the plan should have language for a "non-elective beginning date" which specifies when a distribution may be made without consent.

But if all that fails to convince a custodian, then I presume the Plan Administrator/Trustee/Fiduciary would move the funds. Or if this is the TPA and not the custodian, then get a new TPA.

I must admit I've never heard of a funding institution refusing to make a RMD on the basis you specify. Until now.

I had experience w/ a firm that was overly "forms-oriented" but not on MRDs. Thought #1 is escalate your issue at the investment firm to a higher level of management and insist on being on a phone call w/ their legal department. Thought #2 is (w/ the blessing of legal counsel) have the trustee provide the signature (as it's the trustee's duty to run the trust in accordance w/ IRC): "John Doe by Tom Trustee".

Unrelated to the 2009 WRERA rule.

Does this difficulty in communications between the plan's fiduciaries and their service provider suggest that the fiduciary responsible for service-provider selections must consider a reevaluation and the possibility of inviting proposals from a range of candidates?

How many of your clients have followed your advice to fire a service provider that does not perform correctly? I think I am batting zero.

That is exactly the difficulty - it is not as easy to fire such a service provider as it should be, and on the other hand, trying to force them to comply is also expensive for the client. However, as noted, we can make the client aware of the problems and risks, and the client will have to decide a course of action. I wanted to try to obtain a sense of whether this is an industry-wide issue, or if it is a low-quality service provider. These comments help to sort that out a bit.

Try this: If a service provider refuses to follow to the instructions of the plan administrator, the provider is exercising contol over the plan assets and administration. That makes the provider a fiduciary. Most providers do not like that idea. After explaining the facts of life to the provider, demand proof of the ERISA fidelity bond that is required for fiduciaries. Next, go the DOL. The DOL is more interested in fiduciaries than service providers.

I like QDROphile's solution! Tighten the thumbscrews a little. Waterboarding is out.

Even the THREAT of reporting them to the DOL for exercising a fiduciary judgment to prevent the plan from properly paying required distributions might make them less recalcitrant.

P.S. - to play Devil's Advocate for just a moment - it is possible that the provider is justified, depending upon the specific terms of the plan, the terms of the contract with the sponsor, etc., so I at least allow for the possibility that they are operating properly and reasonably.

Much as I love these theoretical discussions, wouldn't it be a whole lot easier to just get the participant's signature???

I am dealing with a situation where the participant died in 2008 and the death beneficiary requested the RMD by 12/31/2008. The plan document language is on our side. Yet the financial institution stubbornly refused right passed 12/31/2008. We have since filed for EPCRS relief for the plan qualification issue, and asking for abatement of the 50% penalty.

Pardon my ignorance: if this worked, then it would mean the participant could effectively defer a required distribution by omitting a withholding form. Isn't there a default election?

BTW, doesn't the custodian have a copy of the plan?

IF you can get the signature, yes, absolutely, 100% correct. But that IF can sometimes be a tall order to fill.

When you get into large corporations, the number of people you're dealing w/ pretty well guarantees that someone won't return a form. For example, my former employer had 4 plans (2 active, 2 frozen) with nearly 200 MRDs between them (some participants had MRDs from 2 plans). Even with prepaid postage, we'd not get 1/4 to 1/2 of them back.