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Did Safeway screw me?
Old 06-05-2011, 01:11 PM   #1
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Did Safeway screw me?

so i quit safeway a year ago,
they sent me a letter saying i had some retirement funds to receive, and to reply within 30 days instructing them how to pay it out, or they would just send me a check which would be 30% less then the actaul sum due to taxes n stuff.

i opened a roth ira, sent them the all the info on the form they provided, with 20 days to spare.

they still payed out the lump sum minus 30%

Is there anyway i can have them undo this?

and more importantly-

how did those evil bastards make money off paying me that lump sum?
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Old 06-05-2011, 01:24 PM   #2
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Sounds like you simply did a Roth conversion which is taxable. I don't think Safeway made any money on it - the withholding goes to Uncle Sam.
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Old 06-05-2011, 01:33 PM   #3
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If I have this right, you had money in a retirement account that had never been taxed. They transferred it into a Roth, but took tax out.

I am no expert on this, but that sounds about right. Roth funds are after tax, then grow tax free. Had you opened a regular IRA, then the money should be transferred tax free. That's how I see it, but it could be wrong.
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Old 06-05-2011, 01:41 PM   #4
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i wanted them to transfer it to a Roth, but they didn't.
they sent me a check.
the amount they sent me was 20% less than the original amount.

why would they ignore the transfer request, they must have something to gain by sending me the check.
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Old 06-05-2011, 01:43 PM   #5
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why would they ignore the transfer request, they must have something to gain by sending me the check.
Just slowly pass backward through the paranoia installer that you walked through earlier, and you should be fine.

Ha
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Old 06-05-2011, 01:46 PM   #6
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If the money went to you, you have 60 days to transfer it to a traditional or Rollover IRA.

!If the money went to your Roth IRA, you should be able to recharacterize it back to a traditional or rollover IRA.(nevermind)

Call your vendor and tell them what you want to do.

The kicker is this was pre-tax money so they withheld taxes for you.
If you want to avoid paying the taxes this year (and 10% penality if you got the distribution sent to you and don't move all of it to a Tradtional IRA), you will need to pony up the additional 30% deposit.

You will get it back at tax time if you do it right.

It should have been a tax free transfer of pre-tax funds to a pre-tax account. You muddied the water by sending it to a post-tax account.
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Old 06-05-2011, 01:58 PM   #7
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understood. thanks for the info.
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Old 06-05-2011, 03:03 PM   #8
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If you have the cash , you can roll the withheld amount into your roth by depositing a check plus the payout from your employers. You will get a 1099 with the taxes paid from them and so you will have a tax prepaid. Don't forget the amount you will owe on that income for state taxes.
Please realize that your payout to Roth will add to your salary for the year which will make it a much higher number for income then you feel like you made for the year.

Now if you want to start a gripe fest about Safeway from a consumers standpoint-I'm there with you
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Old 06-05-2011, 03:46 PM   #9
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understood. thanks for the info.
Are you going to change your user name now?

Talk about shooting and asking questions later!

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Old 06-05-2011, 05:46 PM   #10
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Unless it was a Roth 401k, Safeway could not have moved the money directly into a Roth IRA. You cannot do a transfer and a conversion at the same time. You need to first put in into a traditional IRA, then if you elect later you can roll it into your Roth. Since you have ended up taking a direct distribution, they withheld money (which was sent to the IRS) and you have a limited time to get that money into an IRA or you will be taxed on the whole amount.

It sounds like the info about a Roth IRA account is not what they needed, so they just ignored it. Not much they could do perhaps except try to contact you again. They are not allowed to transfer to the wrong kind of account.

You are in a pickle now. You don't mention account size, but suppose it was 10K. You have a check in hand for 8K now. You have a limited time to get 10K into an IRA, so if you don't put the 8K check plus another 2K from somewhere else in soon the whole thing will be a distribution and the IRS will charge you tax. If you only put the 8K, then the IRS will treat the 2K they were sent as income to you and you will owe tax on it. Substitute whatever numbers are relevant. I had this at 30% which was your original amount, then changed to 20% which was your later post. I don't know why your numbers change, but hopefully the concept is clear here.

You have very limited options and very limited time here. Once the time expires you will have zero choices and will owe tax on everything. There is no grace period on these rules and no way to do them over. If you want to provide details, people here may be willing to make suggestions, but if any of this is unclear (and it sounds like some of it must be or you wouldn't have made the mistakes you already made to get here) you need someone to help you do this right, and quickly.
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Old 06-05-2011, 07:16 PM   #11
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And if you chose to post again, please do so under a less offensive logon.
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Old 06-05-2011, 08:19 PM   #12
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And if you chose to post again, please do so under a less offensive logon.
What, less offensive than "East Texas"?
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Old 06-05-2011, 08:23 PM   #13
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What, less offensive than "East Texas"?
As Larry is fond of saying, "I don't care who ya are, that's funny right there..."
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Old 06-05-2011, 09:09 PM   #14
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As Larry is fond of saying, "I don't care who ya are, that's funny right there..."
So hard to figure out which of us posters he was referring to...
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Old 06-07-2011, 11:16 AM   #15
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What, less offensive than "East Texas"?
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As Larry is fond of saying, "I don't care who ya are, that's funny right there..."
"I had the right to remain silent, but did not have the ability."

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Old 06-07-2011, 12:38 PM   #16
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What, less offensive than "East Texas"?
West Texas, or more specifically "Texas Panhandle" ...
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Old 06-07-2011, 12:44 PM   #17
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Changed the thread title by removing the "How" from the title and posing it as a question rather than an accusation, since I think the mechanics of the transaction have been explained and justified.
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Old 06-08-2011, 04:58 PM   #18
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West Texas, or more specifically "Texas Panhandle" ...
Spent my formative years in the Panhandle. The first time I took my spouse there we were just south of Dumas when I said there was one thing I failed to mention. At that exact moment there was a loud "WHAT IS THAT SMELL?" I said that's the one thing I failed to mention.

I wonder what's worse: a feedlot smell or a chicken house smell?
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Old 06-08-2011, 05:01 PM   #19
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I wonder what's worse: a feedlot smell or a chicken house smell?
If you spent 5 seconds downwind from a pig farm, you'd have your answer.
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Old 06-08-2011, 10:55 PM   #20
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If you spent 5 seconds downwind from a pig farm, you'd have your answer.
One of the reasons we got our "dream home" so cheaply is because it's downwind of a pig farm and next to a sewage pumping station.

Joke's on them. The pig farm shut down a couple years before we bought the place, and the sewage pumping station has been undetectable since we moved in.

Meanwhile our neighbors on our other side have been most conspicuous in their detectability, particularly noise pollution...
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