Does anyone know of/have a good standardized transmittal letter to send to participants regarding correcting their failure?

How about this?

Dear Participant,

We need to take money from your retirement account and make it taxable to you now. This will cause you to have less money than you otherwise would. Also, studies show that you will only blow this money on frivilous items and not save it for your retirement. Your chances of retiring in a trailer home just increased.

Sincerely,
TPA

P.S. You will undoubtedly blame us for your inconvenience. Please consider your angry rant at our administrator as having already been acknowledged.

Well, if you send this message, be sure you spell frivolous correctly, so you don't open up yourself for ridicule.