My 401(k) Was Closed Without My Knowledge

This episode is brought to you by SmartVestor. Connect with an investing pro near you at ramsysolutions.com slash SmartVestor. Ryan is with us in Hartford, Connecticut. Hey, Ryan. Welcome to the Ramsey show. So I have a bit of a problem. I never thought this was going to happen. So in 2018, my father passed away and he left me and my brother a 401k plan. That's four to five years. I got a check in the mail this morning.

uh... or about two hundred and forty five thousand the original account balance was about three hundred thousand and what's happening is they gave me the check and i have to pay the iris that fifty five thousand difference from the three hundred thousand two forty five i call them and ask them if they could roll it over and they said once they issued the check there's nothing that can be done who told them to issue the check not many

They have a five-year plan, I guess, for the death benefit that if it's not rolled over to something else within five years, they must close the account and just issue a checkout. It's super confusing. The way they explained it to me, I was on the phone with them for an hour and a half this morning with my 401k company. And they pretty much said, once we issue the check, there's nothing that can be done. There was no workaround.

Yeah. They had it. They had until this. That's what I'm saying. Yeah. I'm sure you don't have an extra 55 grand laying around. No. So the way it worked is my account balances 300,000. It started like 215 and over the years, I got up to 300. They issued me a check for 245. They already took the money out and sent it to the IRS and issued me the difference.

Yeah, they have to withhold 20%, that's the rule. If you take a withdrawal, but this is an involuntary withdrawal without any contact to you or anything, which is completely at a minimum unprofessional. What caused you to wait the five years as opposed to rolling it over? Because the 401k plan, I thought it was invested and had really good options. Like I built all of those same options exist in the open market. Yeah. And I have my own personal investment accounts and I do it with that as well.

Don't rock the boat if the boat shouldn't be rocked. So the way I figured is the 401k plan was perfectly fine. I kept it in there just because the investment options were fine. It was just it's a retirement account. I was treating like a retirement account. I wasn't going to touch it to all the 65. I'm 30 now. Yeah. What are you like? I make

I'm a truck driver, so I make about 110,000 a year, and I also own a small business that I make about the same. OK, under the secure act that Biden passed, you have 10 years to liquidate the 401k completely. You should have been liquidating it at one tenth a year from the time the secure act passed two years ago, and you've not been doing that. So I didn't know about that. I know.

I'm trying to figure out how that plays into this and how hardcore. Let's pretend that we figure out a way to lean on them and they cancel the check and put the money back in the 401k so that you can roll it over within 30 days, which is what they should do if they're

uh... it at our people of integrity this is a problem it's not technically unethical it's just so nasty that it ought to be unethical uh... what that is a big because it's a lot of money it's going to cost you it's going to cost you uh... you know twenty thirty thousand bucks and that you don't have a cost me two years if i think two whole years of

of games because of this. I never thought I would be upset to get a huge check in the mail, but I did. Well, I'm upset because I should have had it rolled over. It should have been huge. All right, so here's what I'm going to suggest you do, and I don't think it'll work, but it's the only thing I can think of.

All right. Go to RamseySolutions.com and click on SmartVester and find a SmartVester Pro in your area that you like after talking to them on the phone. They may be able to call on your behalf and talk them into undoing this and immediately rolling it and they'll help you with the rollover. They may be able to cite

something that a regulation or something that I'm not aware of.

When you started talking, I thought you were going to tell me this was a tiny little 401K, like a $10,000, and they were just cleaning out all the little ones. Sometimes they do that when a company sells or in the event of an inherited 401K, like you've got. But this is huge. This is a lot of money. And so this is, and with no notification at all, this is particularly nasty.

And so, if they had simply notified you, you could have quickly rolled it over and avoided this, right? And they said they notified me, but I... Oh, wait a minute. They're a trucker. You didn't... They did notify you. I cut my accounts. They said they did, but I never... So you've never seen evidence of them... Ask them to prove that they did. Okay. Good idea. I mean, I don't think you've got a basis for suing them, but I'd be tempted to.

i really would i mean cuz you're talking about twenty-five or thirty thousand dollars cost here that is unnecessary five thousand they took out date they didn't know it's going to be given the taxes on fifty five thousand fifty five thousand is going to be taxed

not penalized no no they are when i got my uh... asperman uh... like the summary of what my original account balance with three hundred thousand fifty a check for two forty five i understand they took fifty five thousand they sent it to the federal government as tax withholding and it's not all taxable so they cause the entire cuz you're gonna roll the rest of this if you take the check in your hand and you roll it to a 401k the only harm that's going to come to use the taxes on the fifty five thousand

which is going to be fifteen grand or twenty grand on a you haven't paid anything yet okay they withheld your money fifty five thousand and sent it to the federal government then what you do is you file a tax return of what is actually do

And what we'll be actually do is not 55,000. It'll only be the taxes on 55,000 if you take the check in your hand and put it into an IRA traditional within 60 days of rent right now. So you need to get on the phone with a SmartVestra Pro right now, because at least we need to do that.

Okay, I will. So the worst case scenario, if you follow through on what I just told you, is taxes on $55,000. Because the government has $55,000 of your money as if you're going to get taxed on the whole thing and you're not. Okay. Because you're going to roll the portion in your hand, which is 80% of it, into a traditional to keep you from getting taxed. You got 60 days to do that from the time withdrawal. So folks, you can pull your money out of 401K.

They have to withhold 20%, but you have to put 100% into an account within 60 days to avoid taxation. That's what the problem is. But he can't do that because they got 55 of his money over at the IRS now. And so if you just take the 55, then you're going to pay some taxes, but not 55. So there we go.

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