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ex-employer is more likely to be misinformed and ignorant about 401k distributions rules as opposed to
deliberately fostering fraud. That is common with small employers. IMHO, a simple, polite letter to the current
plan administrator requesting the administrative procedures that entity uses for a direct transfer of the funds to
an IRA is more in order than a threatening letter. Use the latter only if the first request for information is
rebuffed, which is highly unlikely. Armed with the administrative procedures, you should be able to accomplish
the transfer with the least possible hassle.>

I agree that this approach is optimal (and I didn't mean to imply that the first letter should be a threat, tho that's not obvious in what I said--the invitation to explain to legal authorities was intended to come after she had tried to let the ex-employer do the right thing).

However, I don't accept that "misinformed and ignorant" is any excuse. These people (meaning the small company Plan Administrators, et al) are rational human beings, with a clearly defined set of responsibilities. This stuff is not rocket science. I'm just a poor, dumb pogue from Las Cruces, but I learned this stuff well enough to turn my small company's (23-40 people) Plan around and make it a decently performing plan. And I did it as an additional duty, not as something related to what I was hired for. If I can do this, so can they. If they don't, they're either lazy, incompetent, or crooked. In any of these choices, the company has cause for firing them. Yeah, I hold these people to high standards. They're responsible for managing not just other people's money, but their ability to retire comfortably. There can be no ordinary standard for people in that role.

Eric Hines
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