I am from a TPA. We have an Employer/client that is the Sponsor & Trustee of a 401(k) Plan. The asset are invested in Pooled Separate Account with an Insurance Company. A Participant wants to rollover her funds from a conduit IRA into the 401(k) Plan. The IRA Institution does not know how to accomplish this.
The IRA institution can "transfer" to another IRA custodian but the Pooled Separate Account would't accept fiduciary liability for the IRA therefore the IRA institution won't distribute.
The IRA institution can payout without withholding taxes, but the Participant is under 59 1/2 & the IRA institution would issue 1099 coded that 10% penalty apply. The IRA institution suggsted the Pooled Separate Account issue a 5498 showing the money was actually contributed thus negating the 10% penalty, but because the Pooled Separate Account ia a 401(k) Plan NOT an IRA they do not issue 5498.

Anyone have any suggestions? Both the IRA institution & the Pooled Separate Acct are big name companies & I'm astounded that neither's legal department has a solution especially now that most IRAs, not just conduits, may be rolled into qualified Plan. So I figure either the legal departments are out to lunch or I am not phrasing things properly. Any guidance?

There may be some miscommunication.

Generally, all the IRA Custodian requires is a distribution request from the IRA owner and an acceptance letter from the receiving plan. No withholding applies because the transaction would be a direct rollover. The code ( for box 7 of the 1099-R )would be ‘G’. The pooled or not pooled status of the account does not affect how the IRA Custodian will handle the transaction. Your contact at the Custodian may not be familar with the rules...ask to speak with someone else

I dont understand what fiduciary liability has to do with a transfer of plan assets. The custodian transfers the IRA pursuant to a request of the IRA owner to the Qualified plan. There is no fiduciary issue involved. The custodian is acting as a directed party and the plan is accepting the assets. Once the assets are in the plan they are treated as any other plan assets.