How to get 401K money back from former employer when you also need good recommendation from them during your job search?
So I had money in a 401K account (managed by Paychex) with a former employer. I left the money in the account when I left the job and didn't think of rolling it over, which is an oversight on my part. Since I left that position, I've went on to graduate school and was busy with schoolwork. Sometime late last year, I got a tax form from Paychex stating that my entire 401K account has been distributed and because it was early distribution, I got tax penalty as well. I called Paychex up, turns out my former employer ended their relationship with Paychex, so Paychex simply sent all the money via check. The problem is, I never was notified this was happening. Paychex has my address on file, but instead of sending that 401K money to me, they sent it to my former employer, who never notified me that they received it. My former employer also cashed in my 401K check because Paychex put my ex-boss's name on the check as well as mine. For whatever reason, I got the tax form mailed by Paychex, just not the 401K check. Just to clarify, my former employer is a very small firm of about 10 employees and my direct supervisor is the CEO. Paychex says they can't do anything about it, I have to contact my former boss and figure things out.
I contacted my former boss. I left the company on good terms. My ex-boss is not always the most responsive person, but after some back and forth, he asked me to come in the company. He agreed to pay back the money and pay me some nominal interest since it's been a while and I could've invested the money in the meantime (>$10K). He signed something in writing, both of us have a copy of that. He says he can't give me all the money in a lump sum, but can spread out the payment over 6 months. The money will be wired directly to my account.
I thought this was taken care of, but after the date on which he agreed to send over the first payment passed by, I didn't see any money in my account, I contacted him again. He says that he's having financial troubles, but he still remembers our agreement, and he'll send over the money as soon as he is able to. He was a decent boss while I was working for, so I decided to not press too much. But after a couple of weeks passed by, still no money in the account. I contacted him again, and got the same line of "the company is having financial difficulties, I'll pay you the money as soon as possible." In the meantime, I graduated from graduate school and is now looking for a job. I haven't found a position yet due to the economy and I really need the 401K money to live on while job searching, but at the same time, I also need my former boss to give me a good recommendation since that job was the most recent job I had right before graduate school. I'm afraid pushing too hard may piss him off, then I won't get a good recommendation, which will affect my job search.
I've never encountered something like this before. I know my former employer is not always in flush waters. I always got paid on time when I was working there and the check was always good, but my last paycheck bounced due to insufficient funds. My former boss later put enough money in the account so I can cash the check couple of days later. At the same time, when I visited him to discuss the 401K matter, I noticed that he still has at least 5 people work for him. So he doesn't seem to be in such financial difficulty that he can't afford employees. Also, he has been in business for a long time, he was in the same office building for years and it was in a fairly affluent area. $10K should not be such financial burden to a company, especially when parsed out in 6 months. But I don't know what to do now. I need the money, like NOW, so I can pay living expenses, but I also need good recommendation from him, so I can get a good paying FT job.
Any advice would be greatly appreciated.