We resigned from administration of a 401(k) plan about 3 months ago due to nonpayment of fees. We have not received instructions to transfer assets or records to another provider to date. When we resigned, we specifically stated the last date we would process any contributions or distributions from the plan.

A participant terminated and wishes to take a distribution from the plan. As we are no longer the service provider, I don't feel like we have any authority to act on the request of either the sponsor or the participants. Do we have any responsibility to process this request, even though we have resigned as a provider?

Am not a lawyer - so this is just IMHO. On the one hand you have resigned and are not required to do work for the client. But on the other you hold the assets and records. My question is - why treat this as different from plan sponsor asking to send assets and records to ABC company?

If I were you I would send strongly worded letter to employer and explain that they must make a decision on who will take over. Explain they can not just orphan the plan.