They are not recommending the employee resign. They are suggesting you and your firm resign from whatever relationship you have with this client. These people are more trouble then the revenue they bring you is the point.
Firing a client is always hard because they are hard to get but some time it is the best idea.
"Hey, buddy. You have some bad assets. We told you about it and how to fix it. You've chosen not to take our advice. Professional integrity prohibits us (no pun intended) from continuing our business relationship.
See ya, wouldn't wanna be ya."
In other words, no longer our problem.
Sorry, I was referring to footnote 6 of the preamble to the 1996 final regulations.
http://www.dol.gov/ebsa/regs/fedreg/final/96_19791.pdf
It's on the 7th page of the pdf file.