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mandatory cash out woes


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We're currently on hold with our client and a platform that I'll call This Retirement Platform.  The plan has a terminated participant who has a less than $5,000 vested balance.  It's an ERISA plan (there are ER contributions).

It has taken us several DAYS to get someone to accept that this is legal.  I wish I was kidding.

Currently, TRP (by which I mean This Retirement Platform, of course, not naming names) is telling us that such an transaction (a) has to be medallion guaranteed due to "some 2020 law", and (b) must have 20% withheld because it's leaving the 403b plan - yes, even if we're sending it to a rollover IRA.  They can't cite the actual authority for either of these positions oddly enough.

Has anyone dealt with a retirement platform that has tried these tactics before?  Any success pathways (other than "no, give me your manager") or tips to share?  Thank you for allowing me to spill the Tea; it's a hard Row here, but I guess the Price was good at some point.

Thanks.

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If the contract permits the insurer or custodian to require a medallion signature guarantee, it would be about a person who has authority to instruct the requested distribution.

To help your client evaluate how to get what it seeks, consider at least a possibility that the annuity contract or custodial account might not provide the ERISA-governed plan’s administrator authority to instruct a distribution. Some § 403(b) contracts limit a payout right to the individual.

Just as some BenefitsLink mavens like to remind one to Read The Fabulous (plan) Document, sometimes with a 403(b) it helps to Read The F****** Contract.

And don’t assume that a plan overrides a contract; it might not.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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If they just said that their contract doesn't allow it, that would be one thing.  But to say that it's "illegal" is another.  And the withholding thing is a separate matter entirely.

It's clear that we are dealing with people who don't know the rules - either the regulations OR what their contracts specify.  I'm a little concerned that it's taking so many levels of escalation to find even a passing familiarity with the law.

I do agree that we have to work within the bounds of the platform's contract - if they can tell us what they are, that would be nice!

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Over the past 40 years, I’ve many times observed frustrations of the kind you allude to.

Too many banking, insurance, investment-management, and related businesses face too many incentives to provide weak customer service.

But in my experience, the people trying to provide some customer service often are doing the best they can in bad circumstances. And yes, they often invent explanations, and sometimes give wrong answers, without knowing the real content.

For a retirement-plans practitioner, knowing when and how to cut past customer service is a valuable aptitude and skill. Especially if the plan lacks its own power.

My earlier note was to suggest only that it can help to know the client’s rights, and the investment or service provider’s obligation, before asking for something.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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