If hes 55 and 1/2 years old , you pay income tax on the distribution ,
if not a 10% penalty is added

So he is 58- soon to be 59, being terminated from the job and over the age of 55 exempts him from the penalty. Federal taxes will be withheld when the distribution is done, on 20,000 they will withhold 20% or $4,000-- Some states require state withholding as well... the penalty for early withdrawal will not apply.. so the taxes (federal anyway ) should be taken care of, unless you are in a higher bracket.. States taxes may still apply.. The taxes will never go away, however if you roll it into an IRA and take distribution from that the taxes can be paid at years end filing instead of immediately and will be based upon your normal tax bracket, not the 20% standard for 401k's

This would had a more detailed answer based on the details I had given.