I've had a couple people tell me that a distribution fee can't be deducted from a participant's account. This is a minimal processing fee to cover the 1099 and other paperwork associated with the distribution. I've looked at 404© regs and looks to me like it would be OK. Anyone have any specific cites or rulings that would indicate otherwise?

This topic is discussed on the 401(k) board at "1099R reporting" last updated on 1-26-99 and "Which fees can be charged to participants?" last updated on 1-28-99.