Jayman

Thank you all. I think I understand my options. So glad I posted my question here.

Thank you for your reply, C.B. Zeller. What you described should be the right way. Supposedly, Fidelity has an issue returning the money from the forfeiture account without changing my departure date to my 3rd year anniversary date. So, that's not going to happen. I probably should get what I can get before my old employer changes its mind. For some time, they (Payroll & HR departments) weren't even responding to my e-mail/phone calls until I contacted the CFO since I knew him pretty well. He told the Controller to take care of this and it's gotten this far. I am happy at least they're going to pay me. They said they are going to send me a letter to sign a release and they will issue me a check. Even if I pay the 10% withdrawal penalty, it's better than losing the entire $7K. They could easily tell me they're not going to pay me a penny although I have everything in writing. Then, I have to go to a court and it gets messier. Who has time for that and paying the lawyer is going to cost even more? I guess paying the 10% early withdrawal penalty would be the worst case for me unless I am missing something. I just wanted to know if I could deposit this back into an IRA to avoid the penalty. I don't know why I have to go through this, but it just happened unfortunately. The Controller told me to consult with a tax accountant or financial advisor what to do with the money.

My old employer's payroll department gave me an incorrect vesting date prior to my departure. The company had a 3 year vesting schedule for 401k match. They told me I was fully vested as of June 2021. I left the company on 8/11/2021, 7 days short from my 3rd year anniversary date based on this communication with the payroll department. Fidelity forfeited almost $7000 when I rolled over my 401k to a roll-over IRA account. It was really surprising to me. After discussions, the employer acknowledged their mistake and decided to just give me a check for the amount + extra amount to pay the tax. The confusion was that ADP had a rule saying only 1000 hrs had to be worked in a year. When the plan was moved to Fidelity, it was strictly about the anniversary date. Now, I don't want to pay any penalty on this amount. I would like to deposit back into an IRA account. Is this even possible? Wouldn't IRA consider this as a "withdrawl" from a retirement account and the amount would be subject to a penalty? I am 50 years old. I would like to know what my options are in this weird situation. The employer said it's best to do it this way because their plan can be considered non-compliant and cause a lot of headaches. I would appreciate what you professionals think about this situation.