How to get 401K money back from former employer when you also need good recommendation from them during your job search?
September 6, 2011 11:38 AM Subscribe
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.
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.
You were robbed. The money was stolen. This is a matter of the police and lawyers. Forget the good recommendation. Get the money. Your employer should have either a) put the money in a new 401K program or b) have sent you the check, minus unvested amounts, if any.
posted by Mo Nickels at 11:51 AM on September 6, 2011 [18 favorites]
posted by Mo Nickels at 11:51 AM on September 6, 2011 [18 favorites]
The money should never have been spent. It didn't belong to the employer. Employer should have set it aside, untouched, and called you to come get it.
posted by jayder at 11:53 AM on September 6, 2011
posted by jayder at 11:53 AM on September 6, 2011
I am a lawyer and an employee benefits lawyer at that but I am not your lawyer and generally refrain from answering legal questions on the internet, but this is so egregious I had to respond. Please get a lawyer. A good lawyer can help you. This is obviously not legal advice. Look for a lawyer that has experience in ERISA (employee retirement income security act).
posted by bananafish at 12:02 PM on September 6, 2011 [8 favorites]
posted by bananafish at 12:02 PM on September 6, 2011 [8 favorites]
I really, really want to reply in all caps. Your previous employer has broken all sorts of laws and regulations. Tell them to refund the money immediately. If you lawyer up, which is not a bad idea, you'll have to go to court to recoup lawyer's fees. Your state has an attorney general, with a website. Contact them; this is what they are there for.
You are going to pay a 10% early withdrawal penalty. Call the IRS to see if it can be appealed, since you never received a penny.
This is absolutely appalling and unacceptable.
posted by theora55 at 12:15 PM on September 6, 2011
You are going to pay a 10% early withdrawal penalty. Call the IRS to see if it can be appealed, since you never received a penny.
This is absolutely appalling and unacceptable.
posted by theora55 at 12:15 PM on September 6, 2011
From the first paragraph, you have done nothing wrong. This is entirely the fault of your former employer, most likely whomever oversaw the 401(k), and Paychex, and the bank where it was deposited without your signature on the back.
Again, you are not from your description at fault here, at all.
There never should have been a distribution from your 401(k) without your permission, unless the plan was shut down and you missed the notice or let it slide. If you let it slide, the check should have been mailed to you and only in your name
The fact that it was put in your employer's name as well ... hmm, did the bank where it was deposited have your signature as well as your employers? Ask paycheck for a copy of the check. Someone at best mismanaged your money and at worst took it. Go in guns blazing on this.
posted by zippy at 12:42 PM on September 6, 2011 [3 favorites]
Again, you are not from your description at fault here, at all.
There never should have been a distribution from your 401(k) without your permission, unless the plan was shut down and you missed the notice or let it slide. If you let it slide, the check should have been mailed to you and only in your name
The fact that it was put in your employer's name as well ... hmm, did the bank where it was deposited have your signature as well as your employers? Ask paycheck for a copy of the check. Someone at best mismanaged your money and at worst took it. Go in guns blazing on this.
posted by zippy at 12:42 PM on September 6, 2011 [3 favorites]
On reading the rest of your post, in particular your employer's reaction, I'd like to amend my last two sentences:
"SomeoneYour boss at best mismanaged your money and at worst took it. Go in guns blazing on this get a lawyer and immediately put a lien on the company while simultaneously contacting the State Attorney General, the State labor board, the State tax authority, and the IRS."
(nb. I am not a lawyer)
posted by zippy at 12:52 PM on September 6, 2011 [1 favorite]
"
(nb. I am not a lawyer)
posted by zippy at 12:52 PM on September 6, 2011 [1 favorite]
nthing what everyone else said. Your money was stolen. Your boss stole it. Get a lawyer. Agreed with zippy's advice to contact the Attorney General, the state tax authority, and the IRS. Your boss is in violation of so many laws and rules it makes my eyes cross.
posted by bedhead at 12:56 PM on September 6, 2011
posted by bedhead at 12:56 PM on September 6, 2011
If you're able to hold out a while longer: Keep up with the niceties to maintain that good reference, and find yourself a job asap. This will be worth more to you in the long run, when jobs are already hard to come by. Yes it sucks to stay poor, especially when you shouldn't have to be. But, well, you probably lived cheaply enough during grad studies, you can stick with it for a while longer. Then when you get a job, lawyer up and get your money back + interest & legal fees.
On going ahead anyway: If you have reason to fear they'll go bankrupt, best tackle it now. It might be within your ability to keep the legal part separate, a "nothing personal, circumstances have forced me to do this" but when your boss and the guy who signs your paychecks is the same guy, I dunno if you want to gamble like that. Your other options might be to get a written letter of recommendation from your old boss, or use former coworkers as a reference.
posted by lizbunny at 12:56 PM on September 6, 2011
On going ahead anyway: If you have reason to fear they'll go bankrupt, best tackle it now. It might be within your ability to keep the legal part separate, a "nothing personal, circumstances have forced me to do this" but when your boss and the guy who signs your paychecks is the same guy, I dunno if you want to gamble like that. Your other options might be to get a written letter of recommendation from your old boss, or use former coworkers as a reference.
posted by lizbunny at 12:56 PM on September 6, 2011
Oh, and get the recommendation from another person at your former employer.
posted by bedhead at 12:57 PM on September 6, 2011
posted by bedhead at 12:57 PM on September 6, 2011
Here's some help from the Department of Labor:
I suspect my plan is abandoned, but I have never received a notice of plan termination. How could I find out if a QTA has elected to terminate and wind up my 401(k) pension plan?
EBSA has developed an Abandoned Plan searchable database to help participants and beneficiaries find out if a particular plan is in the process of being, or has been, terminated. The site is searchable by plan name or employer name and will provide the name and contact information for the QTA, if one exists. If you do not have access to a computer to conduct the search, you may contact one of EBSA’s Benefits Advisors to assist you by calling toll-free, 1.866.444.EBSA (3272).
Obviously your plan was terminated but they were legally required to have an administrator handle your money.
posted by asockpuppet at 12:58 PM on September 6, 2011
I suspect my plan is abandoned, but I have never received a notice of plan termination. How could I find out if a QTA has elected to terminate and wind up my 401(k) pension plan?
EBSA has developed an Abandoned Plan searchable database to help participants and beneficiaries find out if a particular plan is in the process of being, or has been, terminated. The site is searchable by plan name or employer name and will provide the name and contact information for the QTA, if one exists. If you do not have access to a computer to conduct the search, you may contact one of EBSA’s Benefits Advisors to assist you by calling toll-free, 1.866.444.EBSA (3272).
Obviously your plan was terminated but they were legally required to have an administrator handle your money.
posted by asockpuppet at 12:58 PM on September 6, 2011
Just to reassure you that you didn't do anything wrong by not moving the money immediately. Every employer I've ever left turned my 401(k) info over to me, and then I dealt with the 401(k) company directly. It doesn't matter whether you roll it over immediately or not - the money is yours, and should still be in a 401(k). You could keep it there until retirement if you wanted, it doesn't matter. Your former employer is definitely in the wrong here, not you. And since he's missed paying you back as agreed upon, a call to an attorney is definitely in order. Make sure the attorney gets a copy of the second agreement, too, the one where he said he'd pay you back on a schedule.
I think moving on it now is better than waiting. You need that money for retirement (plus, hey, IT'S YOURS), and I'm afraid the longer you wait the less chance you have of recovering your funds from someone who's obviously in financial difficulties.
And if your ex-boss is vindictive enough to bad mouth you when this is all a result of his own bad decisions, well then, I wouldn't want him acting as a reference for me anyway. Plus it sounds like he may not be in business much longer. You could try going half-way and asking for a written reference for your files. ???
posted by hms71 at 1:30 PM on September 6, 2011
I think moving on it now is better than waiting. You need that money for retirement (plus, hey, IT'S YOURS), and I'm afraid the longer you wait the less chance you have of recovering your funds from someone who's obviously in financial difficulties.
And if your ex-boss is vindictive enough to bad mouth you when this is all a result of his own bad decisions, well then, I wouldn't want him acting as a reference for me anyway. Plus it sounds like he may not be in business much longer. You could try going half-way and asking for a written reference for your files. ???
posted by hms71 at 1:30 PM on September 6, 2011
Addendum from the US Department of Labor page linked above:
the asset custodian of an abandoned [401(k) plan] is permitted to terminate and wind up the plan, including making distributions to participants and beneficiaries
Participant = you.
Beneficiaries = people you named on your form - your inheritors, basically.
Now, if Paychex made out a distribution to you and your employer I'd have to ask, at what point did you name your employer as a beneficiary? Because they're not you, the participant, and absent other information, they're not your beneficiary either.
If Paychex knew the plan was being terminated and made out a check to your employer, it sounds like they made a big mistake in addition to whatever badness your employer has done.
Go to Paychex and ask them "why did you make out a check to my employer when terminating my account?" Escalate until you get a good answer and document your calls. They may realize what deep shit they've gotten themselves into and wish to undo the potentially illegal payment to your employer.
Be polite, be firm, keep pushing.
posted by zippy at 2:22 PM on September 6, 2011 [1 favorite]
the asset custodian of an abandoned [401(k) plan] is permitted to terminate and wind up the plan, including making distributions to participants and beneficiaries
Participant = you.
Beneficiaries = people you named on your form - your inheritors, basically.
Now, if Paychex made out a distribution to you and your employer I'd have to ask, at what point did you name your employer as a beneficiary? Because they're not you, the participant, and absent other information, they're not your beneficiary either.
If Paychex knew the plan was being terminated and made out a check to your employer, it sounds like they made a big mistake in addition to whatever badness your employer has done.
Go to Paychex and ask them "why did you make out a check to my employer when terminating my account?" Escalate until you get a good answer and document your calls. They may realize what deep shit they've gotten themselves into and wish to undo the potentially illegal payment to your employer.
Be polite, be firm, keep pushing.
posted by zippy at 2:22 PM on September 6, 2011 [1 favorite]
Mod note: From the OP:
I got a copy of the cashed check image from Paychex. The check was cashed without my signature in the back.posted by jessamyn (staff) at 3:07 PM on September 6, 2011
Also to clarify, my former employer shut down their 401K plan entirely. My former boss said that no one else was contributing to their 401K and he didn't want to continue to pay administrator fees to Paychex. He also says he didn't know that my 401K check got cashed because his accountant cashes all checks and he wasn't notified by the accountant of this. He said he started going to the bank personally to cash all checks after I notified him of my missing 401K check.
If I were to get a lawyer, how should I go about to find a good lawyer? I'm ok with giving the lawyer a cut of the money that I recover, but I can't afford to pay anything upfront, and I can't afford anyone too expensive either. I've heard horror stories of people I know who spent a lot of money on incompetent lawyers who didn't end up doing anything for them. But I've never hired any lawyer personally and I don't even know where to start other than to flip through the yellow pages and make calls, see which one I click with in person. Is there a Yelp equivalent for lawyers?
Thanks so much for all the advice!
Where was it cashed? A bank? A payday loan type place? Who doesn't verify id for a 10k check?
posted by asockpuppet at 3:52 PM on September 6, 2011 [1 favorite]
posted by asockpuppet at 3:52 PM on September 6, 2011 [1 favorite]
To find a lawyer, often the best place to look is here. Indicate on the form that you want an attorney with employee benefits/401(k) experience. You want a lawyer or firm who has what's known as an AV rating (which is the best rating available and usually given to experienced attorneys) (the AV rating is indicated on the lawyer's page with Martindale). The other good way to find an attorney is to contact the state bar and they can often help you find someone. You'll need to talk to the attorney about payment arrangements, but just explain your financial situation. Your likely to find an attorney that is sympathetic and willing to work with you.
posted by bananafish at 4:18 PM on September 6, 2011
posted by bananafish at 4:18 PM on September 6, 2011
The problem with finding a top-flight attorney is that, for such attorneys, they are looking to make $10k per case, so be prepared for some reluctance to take this. You may have to pay them up front ($2000 or $3000 down) to get them interested.
posted by jayder at 4:29 PM on September 6, 2011
posted by jayder at 4:29 PM on September 6, 2011
Again I'm not your lawyer and this is not legal advice, but you can file a complaint with the Department of Labor (I'm not advising that you do so, but it's an option you should be aware that you have). You can find out about making a complaint with the Employee Benefit Security Administration section of the DOL here
posted by bananafish at 4:33 PM on September 6, 2011
posted by bananafish at 4:33 PM on September 6, 2011
Holy shitballs. I have nothing to say other than to nth everyone else's suggestion of getting a lawyer - just wanted to add in my fury and condolences to you for having to deal with such a crappy situation.
posted by Elly Vortex at 4:50 PM on September 6, 2011
posted by Elly Vortex at 4:50 PM on September 6, 2011
Mod note: From the OP:
The check was cashed at Wells Fargo. I'm pretty sure I didn't put anyone down as my beneficiary for my 401K account, so unless my former boss was the default beneficiary and I didn't read the fine print, I really don't know why Paychex put his name down on my 401K check. I'm assuming he was able to cash the check because his name was on the check along with mine, but I don't have an account with Wells Fargo and have not verified this with the bank yet.posted by jessamyn (staff) at 5:27 PM on September 6, 2011
From the Department of Labor FAQ linked above:
In some cases, if the distributed amount is $1,000 or less, the QTA may transfer the money to an interest-bearing federally insured bank or savings association account or to a State’s unclaimed property fund.
I assume that whatever rules lie behind this also add "and if they do put it in an account, they can't spend it or mix it with the company's general funds."
posted by zippy at 5:55 PM on September 6, 2011
In some cases, if the distributed amount is $1,000 or less, the QTA may transfer the money to an interest-bearing federally insured bank or savings association account or to a State’s unclaimed property fund.
I assume that whatever rules lie behind this also add "and if they do put it in an account, they can't spend it or mix it with the company's general funds."
posted by zippy at 5:55 PM on September 6, 2011
You may be able to find a pro bono attorney through your state bar. I also think it's something the State Attorney General would be interested in. I'm pretty sure your boss has broken all sorts of laws, and at this point, you're going to need some sort of police report or something to be able to fight the IRS penalties for money you never received. The IRS are the real scary initials in this story. They have no sense of humor. None.
I'm willing to bet that the go-to for legal liability is Paychex. What they did appears to be illegal, it was certainly unethical, and I'm willing to bet money they know they're screwed if you go after them. It would be massively bad press, would significantly hamper their business as google results for them started to show the case...it's a nightmare for them to have sent someone's 401k out to their boss to cash. Can you imagine the field day with that story? Paychex should just write you a check and apologize profusely, and if they refuse, then you should start legal proceedings against them too.
Call your district attorney. Ask their office where you should start. They'll know, and I bet they'll be interested in hearing your story. Then call the DA where Paychex operates. I bet they'll be really interested too.
If you're worried about a recommendation, go get a written one, but no recommendation is worth being robbed of 10k. Up with this, you should not put!
posted by dejah420 at 8:36 PM on September 6, 2011
I'm willing to bet that the go-to for legal liability is Paychex. What they did appears to be illegal, it was certainly unethical, and I'm willing to bet money they know they're screwed if you go after them. It would be massively bad press, would significantly hamper their business as google results for them started to show the case...it's a nightmare for them to have sent someone's 401k out to their boss to cash. Can you imagine the field day with that story? Paychex should just write you a check and apologize profusely, and if they refuse, then you should start legal proceedings against them too.
Call your district attorney. Ask their office where you should start. They'll know, and I bet they'll be interested in hearing your story. Then call the DA where Paychex operates. I bet they'll be really interested too.
If you're worried about a recommendation, go get a written one, but no recommendation is worth being robbed of 10k. Up with this, you should not put!
posted by dejah420 at 8:36 PM on September 6, 2011
This thread is closed to new comments.
posted by iamabot at 11:46 AM on September 6, 2011 [7 favorites]