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Don't additional contributions get swept based on previous withdrawal instructions?

Basically, this is a situation where the participant's annual income was about $1,333 and there is a distribution fee (commonly up to $100) that is charged per payment by the service provider. Nobody "wins". The plan sponsor contributed $40, the service provider either gets only the $40 for a fee (or charges the plan sponsor for the other $60), and the participant does not get their $40 of additional vested benefit. Everybody involved should have known that there was an additional amount that would be credited to the participant at the end of the year. This is how the SHNEC works. Everybody should have known that each check issued was going to incur a fee. This should have been disclosed explicitly in the 404a-5 notice, and possibly as part of the request for distribution. I have seen plan administrators take different perspectives on how this would be handled. Some say the participant did not have to take a distribution until after the SHNEC was allocated, so the it was the participant's choice. Some say the participant paid for a distribution and the payment of the remedial amount was part of that distribution, so the plan sponsor picks up the tab. Definitely check the service agreement with the service provider(s). This service agreement may say explicitly how the distribution fee will be handled in the event the participant's account balance was insufficient to pay the fee. In this case, best practice is: what if anything the plan document may say about payment of expenses, what the plan sponsor and service provider have agreed upon, what has been standard operating procedure for the plan in other similar instances (i.e., administrative policy and procedures), and what has been clearly communicated to all parties.