Distribution but no dist form

[jmartin]

We have 401k plan where each participant has their own account. Rather than everyone being invested at one company, each can pick whoever they want. There was a participant who terminated and wanted to cash out. He conacted his investment company, obtained their withdrawal form, had the trustee sign, and he was distributed. We were unaware of the distribution.

For our plans we have our own "plan distribution election form" which has a Speicial Tax Notice. We have them complete this form which serves to not only keep us in the loop but ensures the participant receives the proper notices, and the proper distribution amount. The participant in quesiton was 100% vested, so no issues with the amount.

What is the "correction" here, if any? Does the entire distribution need to be reversed? Do we merely need to send the Tax Notice and have him acknowledge? Should we have him complete our dist form for the files?

[BG5150]

Did the financial institution give a 402(f) notice?

Going forward, I would inform the trustee that a Notice MUST be given, and since nobody can really monitor all the financial institutions with which the participants invest, it's best the requests come throguh your office.

BTW, the penalty for not providing the Notice is $100 per incident (up to $50,000 in a year.) http://www.irs.gov/irm/part4/irm_04-071-018.html#d0e1092

[QDROphile]

The plan adminstrator (fiduciary) should be having heart palpitations. This is great proof that the plan's administrative systems are improper and it is the fiduciary's fault. The fiduaciary needs training and advice about its responsibilities and it shoud start doing its job. If the fiduciary was appointed by a fiduciary, the appointing fiduciary should become involved and evaluate the situation to see if the plan administrator is capable of performing properly and is getting the necessary religion about its responsibilities. I am slightly biased. I believe that a multiple institution arrangements are inherently irresponsible and can only be appropriately maintained with very strict fiduciary vigilence and control. That includes negotiating written arrangements with the institutions that deviate from the institution's usual forms.

[jmartin]

We agree which is why we are using this example to move all participant accounts under one roof....I think if we "borrow" some of your wording, the memo could be quite convincing.