This became an issue when I was with another bank. We beat the H E Double Toothpicks out of anyone at branch level who waived CD penalties and it was taken up to a higher level for approval. So, in answer to how is it done at the branch, they took that ability away, which was good.
We waived all interest penalites for distrubutions if the customer was over 70 1/2. The reason we did this was because we had many clients who not only had minimum's to deal with, but we had many who needed the money for emergency medical situations. Treating a 72 year old badly when their wife is in the nursing home won't get your bank and good publicity!
You'd be suprised how little we really did have to waive. Most didn't want the minimum distrubution and we had to force that on them
the few who wanted more really did need it.
The reason we went to the higher level though for waivers was that we had a rash of staff waiving penalties to allow the product to be moved into a non-fdic insured investment. Most often an annuity. This is a HUGE red flag NO NO in the investment world when you combine it with banks who sell investments. If you do, be very careful who and when penalties can be waived!