When did they do this?
When you leave an employer, they can choose to remove you from their retirement plan. When they do, you are left with choices of how to handle the funds they give you back. Even if you did not request the withdrawal, you received the check so unless you rolled it over (opened another account or put it in another retirement account within 60 days) you are responsible for the taxes on it. It will be considered income and if you are under 59 1/2 you could be subject to a 10% penalty. If you left the company after age 55, you can also qualify for an exemption from the penalty due to separation from service after 55. If you are under 55, and do not have another qualifying penalty exemption as listed in the previous link, you will have to pay a 10% penalty in addition to your regular income tax on the withdraw.
If you did roll it over, then after you enter your 1099-R from the distribution from your employer, you will be asked a series of questions. One question will be what did you do with the money. You will choose I rolled it over. This will remove it from your taxable income and will remove the penalty. If you did not roll it over, TurboTax will give you a list of exemptions to help to see if you qualify to reduce the penalty.
Note: An exemption will only remove the penalty, it will still be taxed the same as your regular income. The rollover is the only way it is not counted as taxable income.
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