Are you referring to the 10% penalty and 20% estimated taxes? When you get a direct payment instead of having it rolled over directly, they have to do it that way.

If you don't want to owe those taxes and penalty, you have 60 days to rollover into a new retirement account, but you'll have to deposit the full balance, not just what you received. Later you can recoup what was withheld for taxes and penalty when you file your tax return.

In addition, if you were not fully vested when you left the company, then the employer was completely within his right to yank the money out he had contributed. It wasn't his idea but the plan's administrator and according to the plan's terms.

No , it is not legal. The only way an employer can touch that money is to have you given him written permission .You can file a report to your local Distric Attorney General office or consult a lawyer

Thanks for the info. At least I can save the penalty/tax