What to do about a wrongful disbursement from a 401k?

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What to do about a wrongful disbursement from a 401k?

My company offered employee stock; we could use money from our 401k or get a loan interest free. I opted to use money from 401k. It was rolled over into an IRA custodial acct for me. Now the company finds out this should not have been done and wants to force me to sign a backdated loan and make the other transaction “disappear”. Is this legal?

Asked on February 23, 2013 under Employment Labor Law, Kentucky

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

The way that you put it here it certainly does sound fishy.  Under what authority are they doing this?  Maybe they are being permitted to do so and are paying penalties on the other end that you are not aware of.  It could be that there could be an agreement that relates back to the date of purchase and transfer rather than being "backdated" as you say.  What worries me is that if you do not investigate this further as to the transfer YOU will be penalized for the early withdrawal from the IRA.  Please go and speak with an accountant as soon as you can.  Good luck.


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