In January we received most of the funds for a conversion plan, along with an explanation from the prior investment company that there was not sufficient cash in their real estate fund to honor any redemption requests at that time. This is an individually directed plan where the affected participants had chosen to invest some or all of their balances in this fund. Nine months later they are still unable (unwilling?) to transfer the remaining funds and have no estimate of when they might be able to do so.

Clearly the blackout period has long since expired. And it is only a matter of time until the plan needs to make a distribution to a terminated participant who has chosen that fund.

Is there any sort of enforcement mechanism that the plan fiduciaries could use against this investment provider in this type of situation?

Could you distribute in-kind (even it required an amendment, possibly restricting in-kind to illiquid assets)?

For a distribution, that would be possible. That doesn't solve the problem with participants not being able to change their investments out of that fund.

Our real issue is that we only administer plans that are 100% invested in the fund family that sells the plan. We have no way to not track this outside asset for participant statements or 5500 reporting.

Check the fund rules for redemptions. Many RE funds have frozen redemptions because they dont want to sell properties at depressed prices so they are restricting distributions to conserve cash. This is no different than the investors who purchased auction rate securities where the markets are now frozen and no one will buy the notes from the investors to provide liquidity.