Wht to do if I received a 401K disbursement but now the investment company is saying I was not eligible and have to pay back the money?

The company I work for went to non-profit status so our 401k accounts were closed and we had the choice to open a 403b. This 401k account was my contributions only – no company match. I thought I could access this money and pay the tax penalty but they are now saying because my employment wasn’t terminated I was not eligible. This was never asked before they issued the disbursement check. It seems to me the mistake is on their end in not asking – and not on the forms I filled out – if I had left my employer. I used the money to pay down debt and don’t have it to pay back.

Asked on May 29, 2012 under Bankruptcy Law, Michigan

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

If the 401k disbursement that you received was in fact made by nistake, but you used the money to pay down debt and do not have it to pay back debt, the best way to resolve the situation is to enter into a monthly written payment plan to pay back what you received in error on terms that you can afford.

Before you do so, I suggest that you consult with an attorney who practices in the area of consumer law to make sure that the money you received was sent to you in error as claimed.


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