Participant paying for distribution fees out of pocket?

[AlbanyConsultant]

A certain fund platform does not allow deductions from the participant accounts to pay for transactions such as loans or in-service withdrawals or distributions. A client on this platform does not want to pay our (very modest) fees for these transactions, feeling they should be borne by the participants. Fund company suggests that the client ask the participants to hand in a personal check with the completed distribution forms.

Logically, this doesn't seem very different than deducting the fee on the way out of the plan, but has anyone been doing this? Is there any formal or informal regulatory guidance? What kind of up-front noticing do you give to the participants? I was thinking just an additional line on the Expense Policy.

And, yes, I suggested that the client might want to change fund platforms if they feel this strongly about it...

Thanks!

[Bird]

So if a participant doesn't pay it out of their pocket they don't get paid? No good; that's an impediment to getting their rightfully owned plan money (or some such term).

I think you have to have a contingency plan to take money from their account. I know certain platforms will allow the TPA to tell them to forfeit money from the participant account, then allow a payment from the forfeiture account to the TPA. Not very convenient, I know! And if you say "pay us, otherwise we'll take the money from the account," no one will pay directly.

[AlbanyConsultant]

My immediate concern was force-outs; the participant isn't handing back forms, so they're certainly not going to hand over a check!